China¡¯s Nanshan Aluminium to build smelter in first quarter of 2014

China’s second-biggest aluminum producer Shandong Nanshan Aluminium Co. Ltd. will begin construction of processing facilities and supporting infrastructure totaling US$5 billion in Indonesia in the first quarter of this year.

Industry Minister MS Hidayat, who last week visited the firm’s integrated processing facilities in China, said on Thursday that it would also build a 300-megawatt power plant to fuel operation of the smelters, and a port to serve the smelter, set to be located on Bintan Island, Riau Islands province.

“The firm is now finalizing the land acquisition for the smelter and will begin building in April,” he told reporters at his office.

The development of the smelter may be completed within two years and, once the smelter begins operation, it will process bauxite into alumina, and alumina to aluminum ingots, Hidayat added.

Nanshan’s board chairman said late last year that it had teamed up with PT Mitra Karsa Utama, which holds a 5 percent stake in the joint venture, to develop the smelter. The bauxite to feed the facility would come from several mines in Riau.

The facility will be designed to generate 2.1 million tons of alumina and 570,000 tons of aluminum ingots each year.

A portion of the total output would be exported to several countries, including China, Japan and the United States, while the rest would be allotted for domestic sales.

Nanshan previously requested a tax facility through the Industry Ministry for its project.

In response, Hidayat said that the government would first study the request and, due to its willingness to build its facility outside Java Island and the integrated supporting infrastructure, Nanshan might be eligible to obtain the tax incentive.

Indonesia, one of the world’s biggest exporters of natural commodities, including nickel and coal, will next week implement a ban on unprocessed mineral exports in a bid to give added value to its mining commodities.

The planned ore export ban has already prompted many foreign companies that source their materials from Indonesia to build smelters here.

At present, Indonesia is China’s biggest bauxite supplier.

In anticipation of the ban, China’s top aluminum maker China Hongqiao Group and its local partners, including PT Cita Mineral Investindo Tbk., through its joint venture PT Well Harvest Winning, are currently constructing a $1 billion alumina refinery in Ketapang, West Kalimantan. The smelter will begin operation in 2015 with an annual capacity of 2 million tons.

Currently, Indonesia only has one aluminum smelter, in North Sumatra, operated by PT Indonesia Asahan Aluminum (Inalum), which the government recently took over from its partner — Japanese consortium Nippon Asahan Aluminium (NAA), which consists of 12 Japanese firms — after a partnership of more than three decades. With the full ownership, it aims to double the smelter’s output to 500,000 tons of aluminum ingots.

The government has previously said that Kuala Tanjung, where Inalum is located, will be turned into an industrial cluster for aluminum-based products.

Established in 1993 and listed in 1999, Nanshan focuses primarily on the manufacture and distribution of aluminum products. Apart from building its production facilities, the firm is also engaged in the power generation business.

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