Bauxite: Indonesia decides to refine locally

2023-06-01 00:01:54

After betting on nickel processing, Indonesia is replicating its strategy with bauxite, the basic ingredient for making aluminum. Fifth largest producer in the world, the country prohibits from June 1 the export of unrefined bauxite.

The ban on exporting raw bauxite was announced last December. President Widodo then explained that he wanted “ the well-being of the population ” and the ” country development “. In 2020, the same strategy applied to nickel had led to the development of the industrial sector and convinced the authorities to locally transform other raw materials. The embargo on the export of bauxite is therefore a logical continuation of Jakarta’s strategy.

Will China support local refining?

Ranked 5th in the world for producers, Indonesia produces just over 20 million tonnes each year. It already has the infrastructure to refine part of this bauxite and produce 4 million tonnes of alumina. But in addition to the increase in alumina volumes, will the country seek to go further and produce aluminum? Or will he choose a lower added value, with alumina, but which guarantees more stable prices than those of aluminium?

The level of Chinese investment that the country will succeed in attracting will undoubtedly provide part of the answer. China is indeed confronted on its territory and in particular in the region of Yunnan with droughts which affect the hydroelectric potential, and jeopardize its aluminum production.

Little impact expected on bauxite prices

But if the Middle Empire enters into a new partnership logic with Indonesia, what about the projects for the transformation of raw bauxite on Guinean soil? This is one of the questions posed by Jakarta’s decision today. Guinea has become China’s leading supplier of unrefined bauxite over the years.

Whichever path Indonesia takes, bauxite prices should not be affected. “ The ore is not listed on the stock exchange and is traded under strict commercial relations “, specifies Yves Jegourel professor at the National Conservatory of Arts and Crafts and holder of the chair “Economy of raw materials and sustainable transitions”, with a relatively stable price which is around 50 dollars per ton – import price in China.