AluNews - March 2014

Alcoa to Curtail 147,000 Metric Tons of Aluminum Smelting Capacity in Brazil

Alcoa Inc. - March 28th 2014,

NEW YORK & SÃO PAULO--(BUSINESS WIRE)--Alcoa (NYSE: AA) today announced it will curtail 147,000 metric tons of smelting capacity at its São Luís (Alumar) and Poços de Caldas smelters in Brazil due to challenging global market conditions in primary aluminum and increased costs that have made the smelters uncompetitive. The curtailments are expected to be complete by the end of May 2014.

In 2013, the Company curtailed 34,000 metric tons at Poços and 97,000 metric tons at São Luís. The new curtailments will include the remaining 62,000 metric tons of capacity from the Poços smelter, resulting in a full curtailment of its three potlines. Another 85,000 metric tons will be curtailed at São Luís.

“Across the globe, we are taking measures to curtail high-cost smelting capacity that is not competitive and reshape our cost profile,” said Bob Wilt, President of Alcoa Global Primary Products. “These are difficult but necessary actions in support of Alcoa’s strategy to lower the cost base of our upstream businesses.”

As a result of the smelter curtailment, the Poços refinery will also reduce production accordingly. The mine, aluminum powder plant and casthouse at Poços will continue normal operations, as will the refinery at São Luís. Other Alcoa operations in Brazil are not affected.

“We know how deeply this decision affects our employees, our contractors and our communities,” said Aquilino Paolucci, President of Alcoa Latin America and the Caribbean. “While our teams have worked incredibly hard to make these facilities more competitive, we must take steps regarding our primary metal production in Brazil given the market conditions we are facing. We appreciate the support of governments at all levels, and will actively work in partnership with our employees, unions, and community stakeholders to manage through this transition and minimize the impact.”

In May 2013, Alcoa placed 460,000 metric tons of smelting capacity under review. Once all announced curtailments and closures are complete, Alcoa will have approximately 800,000 metric tons, or 21 percent, of smelting capacity offline.

Total restructuring-related charges associated with the Brazil curtailments in the first quarter are expected to be between $40 million and $50 million after-tax, or $0.04 to $0.05 per share, of which approximately 30 percent would be non-cash.

Alcoa’s review of its primary metals operations is consistent with the Company’s goal of lowering its position on the world aluminum production cost curve to the 38th percentile and the alumina cost curve to the 21st percentile, by 2016.

New manufacturing plant boost for Hunter

ABC - March 28th 2014,

There is a vote of confidence in the Hunter's aluminium sector, with a $60 million cables manufacturing plant being commissioned at Tomago today.

Bahrain-based Midal Cables International has built the manufacturing plant at Tomago which will use molten metal from the nearby aluminium smelter.

It will use the molten aluminium to make rods, wire and conductors.

Midal Cables managing director Hamid Al Zayani says the plant will play a key role throughout the Asia Pacific.

"This optimism comes from the fact first that we have a very important market share in the Australian market that we'd like to protect and consolidate," he said.

"But also this country enjoys a high level of free trade agreements with the rest of the world and we are looking at this factory to be the hub for servicing the Pacific rim."

In 2012 the Hydro aluminium smelter closed its Kurri Kurri plant because of high production costs, the impact of the Australian dollar and low prices.

Mr Al Zayani says the Midal plant will be state of the art and its prospects are good.

"Aluminium has been growing at 15 per cent per year on a global basis," he said.

"Some smelters are proving to be not viable to carry on but if you look at the global consumption that has been going up 10 or 15 per cent.

Only the effective smelters will survive.

"The ones that carry the highest technology and most competitive energy."

Press Metal may consider expansion of smelting operations in Sarawak

Daily Express - March 24th 2014,

MUKAH: Press Metal Berhad may consider expanding its smelting operations in the state if the state government's plan to construct more hydro electricity dams materialises.

Chief executive officer Datuk Paul Koon Poh Keong told the media here that this was because the industry was basically a heavy consumer of power.

The state government is mulling building dams in the Kapit and Miri divisions simultaneously from next year. It has now the 2,400MW Bakun and 944MW Murum dams.

Koon said Sarawak was blessed to have a lot of hydro dam potential.

"It is going to be power rich. Should we proceed with our expansion plan, Bintulu will be an ideal place.

"This is because the government is building a new sea port in Samalaju which allows us to save on transportation and logistic costs," he added.

Press Metal has invested about RM3 billion in its Mukah and Bintulu plants.

The Mukah plant is capable of producing 120,000 tonnes and Bintulu about 320,000 tonnes annually.

The joint production of 400,000 tonnes is the biggest in South East Asia with an annual export value estimated at US$1 billion.

Koon said the industry was going to be a very important one for Malaysia due to increasing usage of aluminium products in the automobile, construction, packaging and transportation industries globally.

"Aluminium appeals greatly to the world which is getting more environmentally conscious. It is also highly recyclable and does not lose its property in the process, unlike plastic," he added.

Koon said Malaysia, through the two smelting plants, was now a global name in the industry and also due to the fine quality of billet and ingot exports.

Meanwhile, commenting on the power failure in June last year which badly hit the Mukah plant, he said after a four-month shut down, it regained full production early this month.

"The shut down easily cost us RM100 million in losses. We have also regained the confidence of our investors and buyers," he added.

"We have had many meetings to address the problem, while identifying possible emergency and mitigation measures, over such an incident happening again," he said. - Bernama

Koon said power failure was a common happening the world over.

"But it should not be allowed to prolong as it can be catastrophic for an industry like ours," he added.

He said efforts were also being vigorously pursued to localise the industry by hiring more local experts and trained workers as the plants are expected to run for the next 30 to 50 years. - Bernama

MetroCoal bids for Pisolite Hills owner Cape Alumina

Mining Weekly - March 18th 2014,

ASX-listed MetroCoal has made a bid for fellow-listed Cape Alumina, which owns the stalled Pisolite Hills project, in Queensland.

MetroCoal made an unconditional cash offer to acquire all Cape Alumina’s shares through an on-market bid, offering Cape Alumina shareholders 0.6c for every share held.

Cape Alumina’s shares rose sharply to A$0.048 on Tuesday, up from an opening price of A$0.027 a share. By the end of the day, the company’s stock traded lower at A$0.019 a share.

MetroCoal said that by acquiring Cape Alumina, the company could expose its shareholders to the diversified bulk commodities of bauxite and thermal coal, for a relatively small capital outlay.

The company was seeking control of Cape Alumina to diversify its asset base and risk profile to provide it with stronger near-term and long-term project pipelines.

Cape Alumina’s shares have been lagging since the Queensland government effectively banned the company’s billion-dollar Pisolite Hills project by declaring the Steve Irwin Wildlife Reserve and the Wenlock river, on Cape York Peninsula, the region’s first ever strategic environmental area.

The state’s decision also caused Cape Alumina to abandon a proposed merger with MetroCoal, which had been looking at developing Pisolite Hills.

Cape Alumina subsequently shifted its focus to the development of its Bauxite Hills mine and port project.

MetroCoal said that on gaining control of all Cape Alumina shares, the company would continue to engage with the Queensland government to ensure that the Bauxite Hills project proceeded.

The company would also look to re-submit development plans for the Aurukun bauxite deposit, after the Queensland government took the decision to defer project development, stating that the benefits of the proposed development were currently insufficient.

MetroCoal would further use its surplus cash to fund Cape Alumina’s bauxite projects, in particular the Bauxite Hills project, with a view to commercial production, while supporting the company’s optimising opportunities with third parties in the exploration and development sector.

Cape Alumina chairperson George Lloyd told shareholders that the company was considering the terms of the on-market takeover bid, and would advise shareholders on a course of action as soon as an assessment was completed.

“At this stage, we advise shareholders to take no action.”

UC RUSAL and Omen sign shareholder agreement to create joint venture

RUSAL - March 17th 2014,

Moscow, 17 March 2014 – UC RUSAL (SEHK: 486; Euronext: RUSAL/RUAL; Moscow Exchange: RUALR/RUALRS), a leading, global aluminium producer, and Israeli company Omen High Pressure Die Casting (“Omen”), a specialist producer of automotive components from non-ferrous metals, announce the signing of a shareholder agreement to create a joint venture to produce automotive components.

The joint venture “VolkhOR”, which will be held in equal share (50/50), will be based on a production site at the Volkhov aluminium smelter (“VAZ”). The JV’s capacity is estimated at 5kt of auto-components per year. Start-up operations will be held in September-December 2014. The start of production is scheduled for the first quarter of 2015.

RUSAL will provide the joint venture with 5ktpa of primary foundry alloys with an option to increase supplies. Omen will in turn create cutting-edge automotive components, in line with the best global standards.

The financing will be provided on a parity basis, with each party investing USD 1 million into the project, with external borrowings to cover the remaining funds required. Total investment volume is estimated at USD 20.6 million from 2014 through 2016.

“Thanks to its close location to key sales markets as well as lack of local competition, VolkhOR has great potential. We expect that engine parts, steering columns, break-gear details and other auto-components produced at the JV will be in high demand in Russia and other CIS countries. GM, Ford Sollers and Renault have already registered their interest in such products,” commented Alexey Arnautov, UC RUSAL’s director for new projects.

The shareholder agreement is another step forward in the partnership’s development following the signing of a memorandum between the Leningrad region, VAZ’s trade union committee and Omen at the XVII St. Petersburg International Economic Forum in 2013.

Earlier, RUSAL and The State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’ (“VEB”) announced the signing of a Memorandum of Intent to convert RUSAL’s loss-making smelters. RUSAL and VEB intend to work together to create production facilities to produce aluminium- and aluminium alloys-based automotive components, rolled and cable products.

China's 2013 domestic spot prices for copper, aluminum, lead, fall 7% on year: MIIT

Platts, McGraw Hill Financial - March 13th 2014,

China's domestic spot prices for copper, aluminum and lead fell around 7% year on year in 2013 on weak demand, the Ministry of Industry and Information Technology said Thursday.

Lead posted the largest drop, falling 7.4% year on year to average Yuan 14,249/mt ($2,321/mt), followed by a 7.1% drop in aluminum to Yuan 14,556/mt. The domestic copper price fell 6.9% year on year to average Yuan 53,380/mt, MIIT said on its website.

The smallest change was seen in domestic zinc prices, which inched down 0.5% to average Yuan 15,178/mt.

"Due to lackluster demand in both China and overseas, and market supply having exceeded consumption, metal prices hovered around low levels last year," MIIT said.

Looking ahead, MIIT expects China's 2014 nonferrous metal prices to hover around the lower levels, with growing pressure on resources, energy and environment," MIIT said.

"[China's] 2014 nonferrous metals sector operations should be slightly better than 2013, but not considerably," it said.

CHINA'S END-2013 ALUMINUM SMELTING CAPACITY RISES OVER 4 MIL MT/YEAR

Separately, MITT said China's aluminum smelting capacity totaled 32 million mt/year at the end of 2013, which was a rise of more than 4 million mt/year from end-2012.

"Unfair power systems is the key factor for the chaotic aluminum smelting capacity expansion, and power system reforms are needed to create a fair competitive environment," it said.

The increase is mainly attributed to various new smelters and expansion projects in the western region of China in recent years, particularly in Xinjiang. An estimated 3-4 million mt/year of new capacity is available in the west, most of which were expected to be ready by 2013-2014, state-owned nonferrous metals information division Beijing Antaike had said previously.

Xinjiang's new smelting capacity made up 15-16% of China's overall smelting capacity in 2013, according to Antaike.

Despite prevailing weak domestic aluminum prices in recent years, numerous smelter startups and expansions have continued in the western regions due to abundant natural resources in those areas, which meant lower power and production costs for smelters.

The Chinese aluminum smelting sector's power consumption was 13,740 kWh per metric ton in 2013, down just 104 kWh/mt from 2012.

Ducab Aluminium and EMAL team up in aluminium rod mill development

Zawya - March 12th 2014,

Saeed Fadhel Al-Mazrooei, President and CEO, EMAL, (L) and Andrew Shaw, Managing Director, Ducab, (R) sign the agreement for the supply of molten aluminium from EMAL facilities to Ducab Aluminium’s new aluminium rod mill. Seen in the second row are Eng. Jamal Salem Al-Dhaheri, Chairman of Ducab (R) and Walid Al Attar, Executive Vice President Marketing

New agreement for molten aluminium supplies to KIZAD project

Dubai - 12 March 2014: Ducab Aluminium LLC and Emirates Aluminium (EMAL) have entered into an agreement for the supply of molten aluminium from EMAL facilities to Ducab Aluminium's new aluminium rod mill that is currently under construction. This agreement is fundamental to the new venture and is evidence of the close cooperation between the two companies.


The location of the new industrial premises for the venture will be the Khalifa Industrial Zone Abu Dhabi (KIZAD) at KP3 area, and the construction will be completed by the end of 2016. Through this partnership, Ducab will be supplied with molten aluminium as the principal raw material for the aluminium rod mill. The new plant aims to target the GCC and MENA markets, with the possibility of expanding to Europe and the Indian subcontinent later.

Ducab Aluminium LLC, which will be located on the KIZAD development's 'Hot Metal Road', will receive deliveries direct from the EMAL smelter to their own facilities and will operate 24/7. EMAL will supply 100% of the plant's requirements.

Ducab Aluminium LLC, is the latest addition to the growing number of downstream industries being developed in KIZAD as part of the UAE's ambitious vision to diversify the economy away from dependence on the hydrocarbon sector.

Ducab's Chairman, Eng. Jamal Salem Al-Dhaheri, commented: "Ducab Aluminium LLC is delighted to announce this arrangement with EMAL, a world leader in the aluminium industry. This long term supply agreement is evidence of the strong partnership that we have with EMAL, allowing Ducab Aluminium LLC to develop a complementary downstream industry in both aluminium rod and conductors."

"This initiative reflects the key role that both companies play in supporting the UAE government's vision of development of nationals and local industry. Ducab will be encouraging national talent to play a deeper role in this project", he added.

Commenting on this latest development, Saeed Fadhel Al-Mazrooei, President and CEO, EMAL, said: "Diversification of the UAE economy is vital for our future prosperity, and Ducab Aluminium LLC ? a joint venture between Senaat and Ducab ? is another example of the progress being made to deliver this economic vision. A comprehensive development plan that is being implemented in the UAE aims to increase the contributions of the industrial sector to the GDP to about 25 percent by 2025."

"EMAL constitutes one of the key pillars of the UAE's strategic plan to diversify the national economy. We are always ready to provide inventory of primary aluminium for local companies, thereby aiding the economic diversification in the country." continued Al-Mazrooei.

Ducab Aluminium is a joint venture between Ducab, the Middle East's leading manufacturer of high-quality cables and cabling products, and Senaat, one of the largest industrial investment and holding companies in the UAE.

The Ducab Aluminium plant will have a production capacity of 50,000 tpa and will commence with an investment of AED 220 million (US$60 million), which includes the costs of the plant, machinery, infrastructure, and buildings. The new plant will produce cables and electrical conductors using the latest technology and production standards, and will implement eco-friendly systems.

Glencore's Australian bauxite-mine plan rejected

MarketWatch, Inc - March 11th 2014,

SYDNEY--The government of Australia's resource-rich Queensland state has turned down a proposal from Glencore Xstrata PLC (GLEN.LN) to develop a big bauxite project in northeast Australia.

Queensland's Deputy Premier Jeff Seeney said the government wasn't convinced Glencore would be able to get a mine up and running at the Aurukun resource on the Cape York Peninsula in "a reasonable timeframe," without providing further details. The government also rejected a proposal from Australian Indigenous Resources Pty. Ltd., a group formed by the local indigenous community.

"The government had decided not to accept two existing proposals to develop the Aurukun bauxite deposit because benefits for local communities were deemed to be insufficient, and timeframes for delivery of those benefits too long," Mr. Seeney, who also holds the infrastructure portfolio, said in a statement Wednesday.

He said the government would shelve the bidding process to build a mine at Aurukun, although he didn't rule out revisiting plans to develop the site in future.

ALSCON to cut losses while aluminium production is suspended

A Business Day Media Ltd - March 11th 2014,

The management of the Aluminium Smelter Company of Nigeria (ALSCON) says it is taking steps to cut down losses while aluminium production at the smelter is suspended.

Stanislav Kruglyashov, managing director of the company, made this known in a statement made available to BusinessDay on Monday. According to him, the firm is also compelled to move in this direction due to ongoing crisis in global industry, further disruption in gas supply and non-completion of ALSCON’s connection to the national grid project.

The company will also look at further optimisation of payroll, which would also include layoff of part of the staff currently employed. “ALSCON will provide employees being affected with compensation benefits exceeding the level in accordance with the Nigeria law”, Kruglyashov said in the statement.

ALSCON is part of United Company RUSAL, which has been working in Nigeria for the past 7 years and during that time has proved itself a conscientious investor. RUSAL has invested actively into the development of ALSCON and also into the social infrastructure of Ikot Abasi, host council of the company, implementing a number of programmes aimed at raising the standard of living in the region, including projects in education and healthcare.

At present, RUSAL is facing exceptionally tough market conditions and executing a producing cuts programme approved by the board of directors of RUSAL in 2013, aimed at reduction of costs and minimisation of losses. So far, within the framework of this programme, the company has reduced aluminum production at its less-efficient smelters across its territory of operation, including mothballing of smelting operation at five smelters in Russia and at ALSCON in Nigeria.

Iran Increases Aluminum Production

Fars News Agency - March 9th 2014,

TEHRAN (FNA)- Iran raised its aluminum production output in the first 11 months of the current Iranian year (March 20, 2013-February 20, 2014), Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) announced on Sunday.

Aluminum ingot production in the first 11 months of this year exceeded 320,000 tons, up by 4 percent compared to the same period last year, it said.

Iran also produced 207,089 tons of aluminum powder in the same period.

In May 2012, Iranian Deputy Minister of Industry, Mines and Trade Vajihollah Jafari said Iran’s aluminum output would hit 1.5 million tons by March 2025.

Jafari noted that the Iranian Mining and Mineral Industries Development and Renovation Organization would implement various projects across Iran to reach the aluminum output target set for the current year.

The official noted that Iran’s world ranking in production of aluminum had risen to 22nd rank which was four steps higher since 2005.

Jafari also stated that Iran plans to become the world’s 14th leading aluminum producer by the end of the 5th Economic Development Plan, which began in 2010 and ends in 2015.

Alro thinks of shutting down some of key primary aluminum production facilities

The Diplomat - Bucharest - March 6th 2014,

The company is forced to prepare a plan to shut down a predominant part of key primary aluminum production facilities, thus drastically reducing the electricity consumption, with these measures involving a significant reduction of the Alro workforce thus they would be preliminary discussed with the social partners, a company release mentions.

The decision comes after because the board of directors no longer supports the 2014 income and expenses budget, as previously proposed for the approval of the general shareholders, due to the newly increased quota for green certificates. The board meeting will take place tomorrow in oder to discuss the issue.

For the 2014 budget, the board assumed a reduction of the cogeneration bonus together with a decrease of the green certificates burden. However, on February 26th, 2014, the quota for green certificates increased to 0.224 GC/MWh, as per Order 12/2014 signed by the National Authority for Energy Regulation (ANRE). This quota must be paid by all energy consumers as part of the subsidy scheme to support renewable energy production in Romania.

Also, all the signals from the market shows that the speculative bubble of the subsidy for renewables will continue even more aggressively.

The increase of the eco-taxes was determined by the commissioning of new photovoltaic (a 2000 per cent increase in capacities over the last year) and wind generation capacities installed by the end of 2013. The principal factors with significant impact are the lack of predictability of the application of the subsidy scheme for renewable energy as well as a significant fall of the aluminium quotations on the international market.

Under the new circumstances, Alro will have to pay for eco taxes a further RON 20 million, only for 2013 regularization and the impact in the budget 2014 is estimated to exceed the current forecasts of the Company with at least 80 million RON, the company release notes.

Romania's Alro plans for plant shutdown

Metal Bulletin - March 6th 2014,

Romanian aluminium producer Alro is preparing to shut down “a predominant part” of its manufacturing capacity, citing difficulties meeting its eco-tax obligations.

"The company is forced to prepare a plan to shut down a predominant part of key primary aluminium production facilities, thus drastically reducing the electricity consumption," it said. Renewable energy taxes have increased in Romania following the commissioning of new and wind-generation capacities installed over the past few years, but Alro had earlier assumed a reduction in those taxes this year. The decision to consider...

Low prices forcing aluminium smelters in China to cut output - trade

Thomson Reuters - March 5th 2014,

* To shut 1-2 million tonnes of capacity in coming months
* Beijing wants to see high-cost smelters forced out
* Bankruptcies likely but not on the wide scale

By Polly Yam

HONG KONG, March 5 (Reuters) - China's aluminium smelters are likely to shut about 2 million tonnes of operating capacity in the coming months as they try to limit losses amid falling prices and dwindling government support, industry sources said.

The capacity cuts will trim China's supply growth, slowing the build up of metal that has weighed on global prices.

Beijing has for years tried to tackle the problem of overcapacity in aluminium and other industries, but the new government of President Xi Jinping has made it a priority. That and low metal prices are goading smelters to act to curb capacity growth.

"I would not be surprised if one to two million tonnes of capacity will close in the first half," said an executive at a large smelter, who did not want to be identified because he was not authorised to talk to media on the topic.

Spot aluminium AL-A00-CCNMM traded below 13,000 yuan ($2,100) per tonne this week, the lowest since mid-2009. The price has fallen more than 8 percent since the start of 2014 and has lost 30 percent from a record high in July 2011.

The price was below full production costs of almost all smelters in China but still above cash production costs for about 5 million tonnes of the 28 million tonnes of operating capacity, industry sources estimated.

Some 400,000-500,000 tonnes of capacity had already closed so far this year and the idle capacity could expand to 2 million tonnes by the second half of the year, said Xu Hongping, Xinhu Futures' analyst, who specializes in the aluminium industry.

More than two million tonnes of new capacity that was scheduled to come onstream in 2014 would be delayed probably to next year, though another two million tonnes of low-cost, new capacity should still start production this year, she said.

"Smelters would have a better chance to survive if they cut production. If they don't, they face bankruptcy," said a senior executive at a smelter based in Guizhou province.

LARGE-SCALE BANKRUPTCIES UNLIKELY

Beijing has not had much luck in curbing overcapacity over the years as local governments often have offered subsidies to keep them running to provide revenues and safeguard jobs. Even Beijing helped by buying metal from smelters in 2008-2009 and in 2013, when domestic demand fell.

But China's new leadership has made tackling industrial overcapacity a priority and has prohibited local governments from providing subsidies.

"Production cuts are certain. We may even see some smelters going to bankruptcy if Beijing will do what it says," said the executive at the large smelter.

But Beijing was unlikely to allow many smelters to go bankrupt because that could expose banks to large bad debts and risk a financial turmoil, he added.

Beijing, though, would like to see low prices to force out high-cost smelters, said an industry source with knowledge of China's policy objectives.

Some firms are already exiting the aluminium industry and others are struggling with creditors.

A 100,000 tonne-a-year smelter in Jiangsu province would close its remaining 50,000 tonnes of operating capacity this month after the parent decided to leave the aluminium industry and take over its debt for about 1 billion yuan, industry sources said.

And creditors took control in January of a 180,000 tonne-a-year smelter in Guizhou, the sources said. The smelter's debt totalled about 2.8 billion yuan, one source said.

A source at a large aluminium smelter in Henan, China's top aluminium producing province, said the local government had sold a majority stake in the smelter to a group of Chinese firms in the second half of last year. ($1 = 6.1430 Chinese Yuan)

China’s Alumina Imports to Fall in Feb. due to Production Cuts by Aluminium Smelters

Shanghai Metals Market - March 4th 2014,

Alumina imports of China are expected to fall in the month of February, largely due to falling post-holiday demand as well as cut down of production costs by aluminum smelters, as said by Shanghai Metals Market. The aluminium producers in China have almost lost their enthusiasm in building up aluminium stocks after the Chinese New Year holiday in early February and cutting the demand for the raw metal. Apart from this, supply in the domestic alumina market seems to be sufficient as the falling prices of aluminium have resulted in cutting down of production costs by aluminum producers, said the research team of SMM.

Inbound shipments of alumina were 642,000 tonnes in the month of January, up by 31.54% year on year due to restocking demand prior to the holidays, with an average CIF price of the metal at $354.02 per tonne. The major alumina Chinese importers in the month of January include Minmetals Aluminum Co, China Aluminum International Trading Co, ., Inner Mongolia Huomei Hongjun Aluminum Slab Co., Yugang Longquan Aluminum Co, Qinghai , Qingtongxia Aluminum Co. and Qiaotou Aluminum & Power Co.

Inalum to build new smelter, boost output

The Jakarta Post - February 28th 2014,

In a bid to double its production capacity by 2019, state-owned aluminium maker PT Indonesia Asahan Aluminium (Inalum) is planning to build a new smelter in the first half of this year, with estimated investment to reach US$1 billion.

Inalum development director Winardi Sunoto said on Thursday that the company was conducting a feasibility study, which was expected to be completed by the end of this year.

“As soon as the study concludes, we will continue with bidding to get contractors and complete other steps that may take between six and eight months,” he told The Jakarta Post on the sidelines of a smelter summit, adding that construction would kick off after the series of steps.

The planned smelter is designed to have a production capacity of 200,000 tons of aluminum ingots. As part of its gradual expansion plan, Inalum is upgrading the capacity of its existing smelter to 300,000 tons of aluminum ingots from 250,000 tons at present.

The expansion plan was born after the Indonesian government took over Inalum from Nippon Asahan Aluminium (NAA), a consortium of 12 Japanese firms, following the expiration of their 30-year contract.

Before the takeover, Inalum, which operated the only aluminum smelter in Southeast Asia, shipped 60 percent of its total output to Japan. The remaining portion was sold to domestic buyers who also relied on imports to meet high demand.

According to Winardi, the company will opt for syndicated loans and raise funds from bond issuance to finance smelter construction.

“We are examining the most competitive option to execute our expansion plan,” he explained.

Earlier reports said that Inalum would likely spend $2 billion on various development projects to include the new smelter, a 600-megawatt steam-fueled power plant to support its operation, a carbon factory in North Sumatra, and an alumina refinery in Mempawah, West Kalimantan, which it will jointly develop with state-owned miner PT Aneka Tambang (Antam).

The refinery, which is slated to produce smelter-grade alumina, will be essential to Inalum’s operations, as it will secure the raw material for aluminum ingot production, which will also double along with the firm’s significant capacity increase.

At present, Inalum imports around 500,000 tons of alumina from Australia to produce the alumina ingots, as the refinery is not available locally.

Winardi said that the firm expected to sell its total ingots domestically and stop exports next year amid surging national consumption and competitive edge in the delivery period thanks to its proximity with local buyers. The biggest output of Inalum now goes to its buyers in Jakarta, followed by those in Surabaya, East Java, and Medan, North Sumatra, which jointly absorb more than 200,000 tons of its overall production.

Domestic demand of aluminum ingots is estimated to reach 600,000 tons each year, but Inalum, which is the only aluminum smelter in the country, can only supply less than half of the figure, leaving the majority to imports.