Government plans grand design for Kuala Tanjung beyond Inalum

After three decades of business contracts, Indonesia has finally taken a bold stance to fully take over the operation of Indonesia Asahan Aluminium (Inalum), which operates the only aluminum smelter in Southeast Asia from Japanese consortium Nippon Asahan Aluminium (NAA) later this year.

The move follows the heels of its much-hyped campaign to spur growth in the downstream industry as Indonesia, the world’s top exporter of raw mineral like thermal coal and nickel ore, aims to climb up the value chain and boost shipment of finished products.

According to the plan, the government would take over the Japanese consortium’s 58.88 percent ownership in Inalum when the contract ends in October this year.

Following the acquisition, the government, which currently holds 41.12 percent shares of the firm, aims to double the smelter’s capacity to 500,000 tons of aluminum ingots each year. The government will also sell the larger part of the aluminum ingots to the domestic market. At present, 60 percent of Inalum’s total output of 250,000 tons goes to Japan.

Industry Minister MS Hidayat has said Kuala Tanjung, where Inalum is situated, will be turned into an industrial cluster for aluminum-based products. A shift in Inalum’s output allocation means many more ingots will be available locally, and that will help the idea make its way into the planned cluster.

Downstream products possible for development there include aluminum alloys, sheets, foil and finished products, such as household tools, automotive components and cables. In the upstream side, it will also be possible to develop alumina refineries and calsined petroleum coke (CPC) factories.

Despite Indonesia’s abundant output of bauxite, Inalum now sources alumina totaling roughly 500,000 tons per year from Australia to support its operation as no refinery to process the ore exists locally. The ongoing construction of an alumina refinery in Ketapang, West Kalimantan, with 2 million tons of annual capacity, will allow the firm to buy the raw material from a local source in the future.

The factory, to be located in 10-hectare area belonged to Inalum, is designed to annually produce 100,000 tons of CPC, a key ingredient in aluminum production, 90 percent of which will be sold to Inalum. The firm presently still imports one third of its overall needs.

Apart from that, the government also mulled to revive an idle aluminum alloy facility once run by local aluminum fabricator, PT Asahan Aluminum Alloy.

But, Indonesia’s dream may go farther beyond an aluminum-based industrial cluster as shown by a master plan proposed by the Industry Ministry. According to the master plan, Kuala Tanjung, which is situated in the Batubara Regency in North Sumatra, will host a range of industrial areas that include aluminum-based industry, agro-based industry, maritime industry and export-oriented bonded zones. Potential development can span in as wide as 6,000-hectare areas available in the regency.

Dedi Mulyadi, the Industry Ministry’s director general for industrial regions development, said that the development of the new industrial point would run in three phases until 2025.