THE resource-rich country is expanding its production of aluminium as the Iran conflict disrupts supplies, relying on its abundant coal reserves to power new smelters that run contrary to efforts to curb carbon emissions that cause climate change.
Prices have risen due to fuel shortfalls and attacks on infrastructure that have slowed production of the lightweight, silverish metal used in everything – from kitchen foil to power lines, smartphones and cars.
In working to raise its limited manufacturing capacity, Indonesia has a strong ally in China, which makes 60% of the world’s aluminium but is keen to reduce pollution and emissions from smelters on its own shores.
Chinese companies have invested in about three-quarters of the planned Indonesian projects.
The Middle East usually makes about 9% of the world’s aluminium, but output from the region is expected to drop 44% this year from 2025, according to Fastmarkets, a commodities information agency.
Energy shortfalls drove Emirates Global Aluminium to back out of deals and Qatar Aluminium Ltd to slash production, while Iranian strikes damaged Aluminium Bahrain’s facilities.
The conflict has magnified the potential for other regions, like South-East Asia, to replace Middle East production, said Andy Farida of Fastmarkets.
“When that supply is so unsure, end users look for alternatives,” he said. “The war has really accelerated this transformation and put Indonesia on the map.”
Aluminium is one of the most used metals in the world and its production is highly energy intensive.
The process starts with the mining of bauxite ore, which is refined into alumina and then smelted into aluminium.
By the end of the decade, Indonesia wants to quadruple its alumina output to 32.5 million metric tonnes and ramp up aluminium production from around one million metric tonnes in 2025 to 14.5 million metric tonnes by 2030, according to the Centre for Research on Energy and Clean Air (CREA).
The Finland-registered non-profit is tracking 32 prospective off-grid coal plants, built by private companies to exclusively power aluminium smelters. These are known as “captive coal” facilities.
There is limited public data on the emissions from these types of plants, according to Syahdiva Moezbar, with CREA in Jakarta.
“This captive coal boom all over Indonesia is essentially not tracked. That is why it’s very concerning,” he said.
Such plans are contrary to Indonesia’s promises to cut its use of coal, the most heavily polluting major fossil fuel and a significant source of planet-warming emissions.
They also threaten to cause more damage at a time when the expansion of Indonesia’s globally important nickel industry is sacrificing local environments for industrialisation.
The aluminium industry accounts for about 2% of annual global greenhouse gas emissions, equalling about 1.1 billion tonnes of carbon dioxide equivalent each year, according to the World Economic Forum. That’s more than the total annual emissions of most countries.
If all Indonesia’s planned projects begin operating by 2030, CREA estimates that the country’s own bauxite reserves will be depleted in less than 12 years.
China has invested between US$5.5bil (RM22.5bil) and US$6bil (RM24.5bil) in Indonesia’s aluminium industry, according to CREA, which forecasts this to surge to US$30bil (RM122.5bil) by 2030.
After Beijing set a domestic cap on aluminium production to curb overcapacity in 2017, Chinese companies expanded into other countries that have fewer restrictions, like Indonesia, according to Putra Adhiguna, with the Jakarta-based Energy Shift Institute.
Indonesia categorises nickel and aluminium as “transition minerals” since they can be used in so-called clean technologies, such as electric vehicle batteries and solar panels.
That’s left a loophole for companies to maintain that these nickel and aluminium investments, which are fuelled by coal, are in keeping with climate change commitments, despite the fact that Chinese President Xi Jinping pledged to stop funding overseas coal plants in 2021.
It is unclear what final products Indonesia-origin metals, like aluminium and nickel, will end up in, said Binbin Mariana of the environmental advocacy group Market Forces.
“It is a huge loophole; an elephant can go through the loophole,” she said. “You say it’s a green product, but it is powered by coal ... That’s definitely greenwashing.”
Aluminium smelters could run on cleaner energy like hydropower, but this would take longer and cost more.
Indonesia is prioritising speed to capitalise on the window of opportunity that the Iran conflict has created, said Adhiguna, of the Energy Shift Institute.
“The speed factor is really what is causing the havoc,” he said.
“This is really running against the grain, against the spirit, of the commitment to the climate movement,” he said. — AP
