Bloomberg News

Chalco Plans to Build Indonesian Alumina Plant for Supply

December 04, 2012

Aluminum Corp. of China Ltd., the country’s biggest producer, is seeking to tap bauxite resources and build processing plants abroad after Indonesia, the largest supplier to China, curbed exports.

The company plans to build an alumina facility with a capacity of 1 million metric tons a year in Indonesia as the first phase, President Luo Jianchuan said in an interview on Nov. 30 in Chongqing. “We’re still doing a feasibility study” and the earliest date for completion of the first phase is 2014-2015, he said, without specifying the cost. Bosai Minerals Group Co. is also considering an investment.

Indonesia banned exports of some mineral ores starting in May, except for mining business license holders that plan to build local processing plants. Those shipments are subject to a 20 percent tax, according to government regulations. Indonesia supplied 80 percent of China’s total bauxite imports in 2011, data from the customs department showed.

Chalco said in August it signed an agreement with PT Indonusa Dwitama to form a joint venture and develop the southeast Asian nation’s biggest bauxite mine. The company has a similar plan in Laos, Luo said, without providing details.

“The current holdings of bauxite resources abroad by Chinese companies are far from enough to meet demand,” said Yang Yunbo, director of the light metals department at the China Nonferrous Metals Industry Association. “Bauxite will be a hurdle to sustainable development in the industry.”

Bosai’s Plans

Chinese imports of bauxite from Indonesia tumbled 55 percent in October from a year ago to 1.05 million tons, while total imports of the ore fell 30 percent to 2.14 million tons, data from the General Administration of Customs showed. Bauxite is used to make alumina, which in turn produces aluminum used in everything from window frames to beverage cans.

Bosai Minerals, a privately owned integrated aluminum producer, may also invest $1 billion in an alumina project with an annual production capacity of 2 million tons, as well as power plants and port facilities, according to company Vice President Liu Jianhong.

“Because the investment is big, we’re cautious in pushing forward,” Liu said. “There are uncertainties regarding Indonesia’s policies. If they change again to allow exports, then the project will be a problem for us.”

The Indonesian Supreme Court annulled last month some articles in Energy and Mineral Resources Minister Decree No. 7, including article 21 that bans exports of mineral ores. The ban is still in effect as the government hasn’t received notification from the Supreme Court on its verdict, Energy and Mineral Resources Minister Jero Wacik said on Nov. 6.

Worldwide Supply

Bosai has bauxite mines in Ghana and Guyana, and plans to ship 2 million tons of the ore from Ghana and 1.5 million tons to 2 million tons from Guyana to China each year, according to Liu. “Our raw-material supplies can be secured in the medium-to long-term,” Liu said. “So apart from meeting our own demand, we can sell to other companies in China.”

The company has an annual production capacity of 800,000 tons of alumina and 200,000 tons of aluminum, and plans to have 3 million tons of capacity for alumina and 1.25 million tons for aluminum by 2015, according to its website.

Output of aluminum in China, the largest producer and user, climbed to a record 1.75 million tons in August, and gained 11 percent from a year ago to 16.5 million tons in January to October, according to the National Bureau of Statistics.

Demand grew 5.8 percent in the first nine months from a year ago to 14.4 million tons, said Wen Xianjun, vice chairman of the association. That’s 5 percentage points lower than the year-ago period and the slowest since at least 2000, said Wen.

Aluminum for three-month delivery fell 0.6 percent to $2,107.75 a ton today after reaching $2,125 yesterday, the highest level in two months.

To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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