The Iran war has dented global supplies of aluminum, raising production costs for the metal used in buildings, cars and airplanes, among other things BANGKOK -- Resource-rich Indonesia is expanding its production of aluminum as the Iran war 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 in the Middle East of the lightweight, silverish metal used in everything from kitchen foil and power lines to 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 aluminum 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. Here's what to know about Indonesia's ambitious aluminum plans: The Middle East usually makes about 9% of the world’s aluminum, 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.
A metric ton of aluminum traded for between $3,150 and $3,250 before the Iran war. But the conflict drove up that price to as high as $3,780 per metric ton in June. It’s now trading near $3,400 a metric ton.
The war has magnified the potential for other regions, like Southeast Asia, to replace Middle East production, said Andy Farida of Fastmarkets. The process starts with the mining of bauxite ore, which is refined into alumina and then smelted into aluminum. By the end of the decade, Indonesia wants to quadruple its alumina output to 32.5 million metric tons and ramp up aluminum production from around 1 million metric tons in 2025 to 14.5 million metric tons by 2030, according to the Centre for Research on Energy and Clean Air.
The Finland-registered nonprofit is tracking 32 prospective off-grid coal plants, built by private companies to exclusively power aluminum 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.
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 industrialization.
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