Manufacturing Purchasing Managers’ Index (PMI) posted 50.9 in February, falling from January' reading of 52.2 and signaling the weakest improvement in the health sector since last November - Photo by Industry Ministry Office

JAKARTA (TheInsiderStories) – The Indonesian government will continue to encourage higher national aluminum production, shooting at a figure of 1.5-2 million tons per annum (MTPA) by 2025, from around 250,000 MTPA at present. This is their attempt to enable producers to meet growing export market demand.

Director General for Metal, Machine and Transportation and Electronic Equipment Harjanto said Friday (23/02) that the Ministry of Industry is implementing a number of policies to create a more conducive investment climate and encourage more investment in downstream and value-added industries.

This is, he said, in line with the instruction of President Joko Widodo to accelerate national strategic projects, including one being developed by state-owned aluminum producer PT Indonesia Asahan Aluminium (Inalum).

In 2017, Inalum produced 250,000-260,000 tons of aluminum, consisting of ingot alloy (90,000 tons), billet aluminum (30,000 tons) and aluminum ingot primer (140,000 tons).

According to the Industry Ministry, domestic demand for aluminum products currently reaches 900,000 tons per annum, far higher than domestic production of around 250,000 MTPA. This demand is projected to increase in line with the expansion of the country’s economy and the growth of its middle class.

President Director of PT Inalum Budi Gunadi Sadikin said last year’s production was 25 per cent higher than 2016 output. The company is now planning to expand the company’s capacity by doubling aluminum production to 500,000 MTPA by 2021.

In the long run, Inalum targets to increase aluminum production to 2 million tons per annum. To achieve this, Inalum, in cooperation with other parties, will develop a smelting plant in Kuala Tanjung in North Sumatra and another in North Kalimantan.

The plant in the North Kalimantan is being prepared with a plan to produce 1 million tons of aluminum per annum. The development of the plant is pending on the availability of electricity supply.

Aluminum is widely used in power transmission, the automotive sector, marine vessels, infrastructure projects and household products.

Global Demand

According to United Company RUSAL Plc, a global aluminum producer, world aluminum demand rose by 6 per cent to 64.2 million tons in 2017. Excluding China, demand grew by 3.7 per cent to 29.2 million tons, while Chinese demand increased by 7.8 per cent to 34.9 million tons.

China continued to lead global growth in 2017, with its economy confounding expectations of a slowdown. Full year GDP increased by 6.9 per cent, an upturn from the 6.7 per cent pace of 2016 and well above the official target of 6.5 per cent.

The key driver of aluminum demand, industrial production, mirrored improvement in the broader economy, accelerating to 6.6 per cent growth in 2017, from 6 per cent the prior year. There was broad-based strength across the major aluminum consuming industrial sectors, with construction, manufacturing and transportation all remaining robust.

Meanwhile, global aluminum supply rose by 5.7 per cent to 63.5 million tons in 2017. In the world excluding China, supply grew by 1 per cent to 27.2 million tons, while Chinese supply increased by 9.5 per cent to 36.4 million tons.

In China, there is strong evidence of the implementation of supply-side reform in the Chinese aluminum industry in 2017, with more than 10 million illegal-operating capacity and project cuts. As a result, according to Aladdiny data annualized Chinese aluminum production in November has dropped to 35.4 million tons from its maximum of 38.6 million tons in July of 2017. (*)