Chinese firms plan to spend $8.6 bln on Indonesia smelters

　　Chinese firms plan to invest $8.6 billion on aluminium and iron smelter projects in Indonesia, the industry minister said on Thursday, in a bid to guarantee supplies of metals under threat from a ban on exports of mineral ores from 2014.

　　Indonesia, a major supplier of metal ores to China, currently has no smelters to process bauxite ore into aluminium, and is trying to drive investment in domestic smelting by slapping a 20 percent tax on raw ores ahead of the outright ban.

　　"The projects are forward moves in the metal refining industry in Indonesia. We hope the two projects contribute to national economic growth by reducing import product dependency and strengthening the domestic metal industry structure," Industry Minister Mohamad Hidayat said.

　　The companies are Beijing Shuang Zhong Li Investment Management Co, Ltd, Oriental Mining and Minerals Resources Co Ltd. and Rui Tong Investment Co Ltd, he said.

　　Three of China's biggest alumina producers are also planning to spend at least $1 billion on Indonesian bauxite mines and an alumina project, industry sources said this month, another sign that the Indonesian curbs are driving major investment in metal processing.

　　China accounts for about 40 percent of the global aluminium market. Indonesia supplied about 80 percent of the 25.42 million tonnes of bauxite China imported in the first half of the year, but its exports dropped sharply in June and July after the new regulations restricted unprocessed ore exports.

　　Firms now have to submit plans to either build smelters or to process their ore locally, before being allowed to export raw ore from Indonesia. Many small scale miners have simply halted output instead.

　　Hidayat said Shuang Zhong Li planned to invest $7.1 billion to build an alumina refinery with a total production capacity of 1.8 million tonnes per year and an aluminium smelter with a total production capacity of 600,000 tonnes of aluminium ingot per year and a 1,250 MW power plant in West Kalimantan or Riau.

　　The other two firms plan to invest $1.5 billion on a direct reduced iron (DRI) plant with a total production capacity of 6 million tonnes per year in West Java, he added.

　　Both projects are to be carried out in stages, the first completed by 2015 and the last by 2020, which is later than the country's 2014 deadline, but many in the industry say the two-year time frame is too short to build costly smelters.

　　The Indonesian Chamber of Commerce has said the country needs around 30 smelters to process various metals.