Linda Yulisman, The Jakarta Post, Jakarta | Business | Fri, August 31 2012
Three Chinese firms will invest US$8.6 billion to build mineral processing facilities this year in Indonesia, a key supplier of metal ore to China, a minister says.
Describing it as “a step forward for processing local mineral resources into metal products,” Industry Minister MS Hidayat said the plan would realize the visions of both nations.
The commitment was marked by two memorandums of understanding inked by the Industry Ministry’s director general for manufacturing-based industry, Panggah Susanto, and representatives of the Chinese firms on Thursday.
“We expect the planned investments will contribute to our economic growth by reducing our dependence on imported products and strengthening the structure of our metals industry through integration of the upstream and downstream sectors,” Hidayat said during the signing ceremony.
According to the plan, Beijing Shuang Zhong Li Investment Management Co. Ltd. will invest around $7.1 billion until 2020 to build an alumina refinery, an aluminum smelter and 1,250 megawatts in supporting power plants in Riau or West Kalimantan.
The refinery, expected to produce 1.8 million tons of alumina per year, is expected to start operation in 2015, while the smelter, expected to produce 600,000 tons of ingots a year, is slated to start service in 2018.
Meanwhile, Oriental Mining and Minerals Resources Co. Ltd. and Rui Tong Investment Co. Ltd. will spend $1.5 billion until 2019 to build a plant in West Java to process iron sand into direct reduced iron. The plant, expected to begin operation in 2016, will have the annual capacity to produce 6 million tons of direct reduced iron used for steel smelting and iron casting, among other things.
The investment comes after Indonesia, one of the world’s biggest suppliers of several mineral commodities, plans to impose a 20 percent export tax on 65 types of mineral commodities next year and completely ban raw mineral exports by 2014 to encourage investment and development in refineries and smelters.
In the first half of the year, Indonesia provided around 80 percent of the 25.42 million tons of bauxite needed by China, which comprises 40 percent of the global aluminum market, according to Reuters. However, exports tumbled significantly in June and July after the export restrictions rules, requiring firms to propose plans to build smelters or local processing, took effect.
The Chinese firms would team up with local partners for the projects were currently in talks for potential joint ventures, Hidayat said, declining to discuss specific firms.
Output of the firms’ production would go to both exports and the domestic market, where demand for semi-processed products has been recorded by local companies such as Inalum, which currently meet their need for semi-processed products through imports, he added.
More Chinese firms have pledged to increase their investment in Indonesia, Southeast Asia’s largest economy, in several industrial sectors, such energy, food processing, textiles and metal processing.
Indonesia has expected more investment from China to compensate for a widening trade deficit with the nation since the implementation of the ASEAN-China free trade agreement in 2010.
The nation’s non-oil and gas trade balance recently booked a $4.05 billion in deficit in trade with China, according to the Central Statistics Agency.
Three Chinese firms will invest US$8.6 billion to build mineral processing facilities this year in Indonesia, a key supplier of metal ore to China, a minister says.
Describing it as “a step forward for processing local mineral resources into metal products,” Industry Minister MS Hidayat said the plan would realize the visions of both nations.
The commitment was marked by two memorandums of understanding inked by the Industry Ministry’s director general for manufacturing-based industry, Panggah Susanto, and representatives of the Chinese firms on Thursday.
“We expect the planned investments will contribute to our economic growth by reducing our dependence on imported products and strengthening the structure of our metals industry through integration of the upstream and downstream sectors,” Hidayat said during the signing ceremony.
According to the plan, Beijing Shuang Zhong Li Investment Management Co. Ltd. will invest around $7.1 billion until 2020 to build an alumina refinery, an aluminum smelter and 1,250 megawatts in supporting power plants in Riau or West Kalimantan.
The refinery, expected to produce 1.8 million tons of alumina per year, is expected to start operation in 2015, while the smelter, expected to produce 600,000 tons of ingots a year, is slated to start service in 2018.
Meanwhile, Oriental Mining and Minerals Resources Co. Ltd. and Rui Tong Investment Co. Ltd. will spend $1.5 billion until 2019 to build a plant in West Java to process iron sand into direct reduced iron. The plant, expected to begin operation in 2016, will have the annual capacity to produce 6 million tons of direct reduced iron used for steel smelting and iron casting, among other things.
The investment comes after Indonesia, one of the world’s biggest suppliers of several mineral commodities, plans to impose a 20 percent export tax on 65 types of mineral commodities next year and completely ban raw mineral exports by 2014 to encourage investment and development in refineries and smelters.
In the first half of the year, Indonesia provided around 80 percent of the 25.42 million tons of bauxite needed by China, which comprises 40 percent of the global aluminum market, according to Reuters. However, exports tumbled significantly in June and July after the export restrictions rules, requiring firms to propose plans to build smelters or local processing, took effect.
The Chinese firms would team up with local partners for the projects were currently in talks for potential joint ventures, Hidayat said, declining to discuss specific firms.
Output of the firms’ production would go to both exports and the domestic market, where demand for semi-processed products has been recorded by local companies such as Inalum, which currently meet their need for semi-processed products through imports, he added.
More Chinese firms have pledged to increase their investment in Indonesia, Southeast Asia’s largest economy, in several industrial sectors, such energy, food processing, textiles and metal processing.
Indonesia has expected more investment from China to compensate for a widening trade deficit with the nation since the implementation of the ASEAN-China free trade agreement in 2010.
The nation’s non-oil and gas trade balance recently booked a $4.05 billion in deficit in trade with China, according to the Central Statistics Agency.
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