Indonesian Adaro aluminum smelter to commission first production phase by end-2025

The upcoming aluminum smelter in Indonesia operated by PT Kalimantan Aluminum Industry (KAI) is expected to commission its first phase of production by the end of 2025, according to sources familiar with operations March 21.

PT KAI is majority owned by PT Alamtri Resources Indonesia, formerly known as PT Adaro Energy Indonesia. Other venture partners for the smelter include Indonesian conglomerate Harita Group and Chinese nickel producer Lygend.

The aluminum project has a projected production scope of up to 1.5 million mt/year of primary aluminum capacity, split into three phases of 500,000 mt/year.

The majority of the alumina supply used for the first phase of production is expected to be sourced locally, said a source closely involved with the management of the smelter.

"We are also working with traders who may introduce us to alumina from neighboring countries," the source added.

As the ramp-up of the smelter will be gradual, the full production capacity of the first phase could be expected later in 2027. Most of the aluminum produced in the early stage would be meant for the export market.

The second and third phase of the project could utilize a mix of renewable energy and coal power for production, according to an earlier plan by PT Alamtri Resources Indonesia, potentially capitalizing on a growing trend of low-carbon aluminum premiums.

Platts assessed the CIF main Japanese ports spot low-carbon aluminum premium(opens in a new tab) for 99.7% P1020/1020A aluminum ingot at $43/mt to the CIF Japan spot premium plus LME cash on March 21, up from $30/mt at the start of 2025.

Platts assessed the benchmark CIF main Japanese ports spot premium and CIF main Asian ports spot premium for 99.7% P1020/1020A aluminum ingot at $150/mt and $175/mt, respectively, plus London Metal Exchange cash on March 21.

Platts assessed the benchmark alumina FOB Australia marker at $390/mt March 21, sharply down from $672/mt at the start of the year on the back of easing supply tightness.

Indonesian alumina is typically priced at a premium to Australian material on an FOB basis primarily due to the relative proximity to major destinations, leading to comparative freight savings.

Other aluminum smelter projects that are currently operating in Indonesia include the PT Inalum and PT Hua Chin smelters.

Some sources in Indonesia said competition for domestic aluminum sales by Indonesian smelters could heat up following a change in policy regarding export revenue in particular, leading to more incentive for domestic sales instead.

The Indonesian government's new regulation for commodity exporters requires a 100% deposit of their dollar-denominated export earnings into the domestic financial system for one year.

This is a significant change from the previous requirement, which mandated that exporters only reserve 30% of their revenue in Indonesian financial institutions for a minimum of three months.

However, exports with a value below $250,000 per transaction are not required to follow the provisions for managing DHE. "These provisions aim to provide leniency to small exporters who have limited capital and transactions and to protect small businesses so that they remain competitive in the international market," the release further said.

Nevertheless, as Indonesian aluminum production grows, domestic consumption is unlikely to be able to absorb all of its capacity, with exports playing a key role in the industry.

Leading destinations in Q4 2024 for unwrought and unalloyed Indonesian aluminum exports are Mexico, China, Malaysia, Italy and South Korea, according to S&P Global Commodities at Sea(opens in a new tab) data.