Inalum to buy alumina from local smelters

Aluminum producer PT Indonesian Asahan Aluminum (Inalum), which the government plans to take over from its Japanese shareholders, is expected to be the main buyer of alumina to be produced by local smelters, an official says.

The director for minerals at the Directorate General for Minerals and Coal at the Energy and Mineral Resources Ministry, Dede Ida Suhendra, said smelters to be built by state-owned Jakarta listed PT Aneka Tambang (Antam) and privately listed firm PT Cita Mineral Investindo, would supply material to Inalum.

“Until the smelters are finished, Inalum will be allowed to import the material needed,” Dede said on Thursday.

At present, Inalum imports all the raw material it needs for the production of aluminum ingots.

Antam and Cita are building smelters to process bauxite into alumina — the material used to produce aluminum.

Cita held the groundbreaking ceremony for its US$1 billion smelter in Ketapang, West Kalimantan, in July. The company and the China Hongqiao Group Ltd. have established a joint venture called PT Well Harvest Winning to operate the smelter. The construction of the smelter, which will have a production capacity of 1 million tons a year, is expected to be completed by 2016.

Cita earlier announced that it would sell its aluminum to Inalum and export the excess.

Meanwhile, Antam may need longer to build its smelter. The company is still working to find a partner to work on its 1.2 million-ton smelter grade alumina (SGA) plant, which will be located in Mempawah, West Kalimantan. The construction of the plant, which is expected to cost $1.4 billion to $1.5 billion, is expected to begin the end of next year or early 2015 at the latest.

Antam president director Tato Miraza said that partners in the smelting project would be allowed to hold a 30 to 35 percent stake in the plant.

Tato said on Thursday that Inalum would be the potential buyer of the alumina which would be produced by the company’s alumina plant in West Kalimantan, which would have production capacity of about 1.2 million tons a year.

Inalum needs between 500,000 and 600,000 tons of alumina a year

Inalum, which was established in 1976, is 41.12 percent owned by the Indonesian government and 58.88 percent by NAA, a consortium of 12 Japanese companies, including Sumitomo Chemical Co. Ltd., Sumitomo Shoji Kaisha Ltd., Mitsui Aluminium Co. Ltd. and Mitsubishi Corporation. The contract to manage and operate the company expires on Oct. 31.The government has rejected the Japanese shareholder’s request to extend its contract to retain ownership in Inalum. Despite the Japanese firm’s threat to take the case to international arbitrage, the government is standing firm in its intention to take over Inalum and make it a state-owned enterprise.