Inalum head wants mineral exports curbed to ensure domestic supply. Stakeholders in the mining industry, notably the government, need to discuss a long-term strategy for mineral resources, as the current export-oriented policy could threaten the country’s energy security in the future, a mining executive has said.
Budi Gunadi Sadikin, the president director of state mining holding company PT Indonesia Asahan Aluminium (Inalum), said the current policy focus on raw material exports to gain state revenue was not good in the long term.
“Don’t sell out all of our [coal] reserves as if they are rocks. If we use them all now, money surely will come in, but the next generation will have a hard time finding the coal to generate their electricity,” he said in a hearing with the House or Representatives on Monday.
Since 2015, coal production has always exceeded the amount set in the National Development Planning Agency’s (Bappenas) National Medium-Term Development Plan (RJPMN) for 2015 to 2019.
In 2018, for example, coal output at 528 million tons was 130 percent of what Bappenas had planned for that year, namely 406 million tons.
The country’s proven coal reserves were estimated by the government last year at around 38.89 billion tons, while its resources stood at 151.39 billion tons.
Assuming average coal exports of 400 million tons per year, the proven reserves would last for almost a century.
Coal resources may be abundant, but the problem, according to Budi, lies in how much of the coal is directed for export. Currently, more than 70 percent of the total output is shipped abroad.
“For example, at [Inalum’s coal mining subsidiary PT Bukit Asam (PTBA)], we produce 25 million tons of coal per year, but in the next five years, we need 11 million tons per year for electricity and 13 million tons for our downstream plants,” he said.
“Hence, in the next five years, we need 24 million tons of coal for our plants and the electricity sector, and the coal-fired power plants will need at least 30 years of continuous supply.”
Budi also pointed to nickel as another export product, of which Inalum’s diversified mining company Antam produced 3 million wet metric tons [wmt] per year.
“If we want to build a stainless-steel plant, we will need 5 million wmt per year. Meanwhile, a battery plant will need 15 million wmt per year, so we need 20 million wmt per year,” he said.
Data from the Energy and Mineral Resources Ministry show that national nickel production in 2018 stood at 17 million tons of nickel ore, while the existing input capacity was 24.52 million tons, leaving a 30.7 percent domestic supply gap.
Currently, there are 13 nickel smelters, and the government aims to have another 22 ready by 2022 to make it a total of 35 nickel smelters.
“Internally, we’ve been outlining a strategy on how to conserve and use our resources. We are very careful in calculating [our resources], so we won’t have to worry about supply once our new plants start operating,” Budi of Inalum said.
The projects are PTBA’s 2×620 megawatt mine-mouth power plant in Tanjung Enim, South Sumatra; Antam’s ferronickel smelter in Southeast Sulawesi; a smelter-grade alumina refinery in Mempawah, West Kalimantan; two plants to produce coal derivatives and PTFI’s copper smelter.
His statement comes amid the government’s push for miners to build smelters or other processing facilities to add value to the country’s mineral products, except for coal.
In total, the country now has 20 smelters, from copper to steel smelters. The number of smelters will increase by 2022, when 41 new smelters are targeted to be operational.
The obligation to build smelters is based on Mining Law No. 4 of 2009, which bans the export of raw minerals within five years after the law’s issuance.
However, five years after its issuance, miners had yet to complete their smelters, so the government relaxed the policy to allow mining firms to continue to export minerals, but with the requirement that they demonstrate progress on their smelter development.
“Hence, we extended the deadline on raw mineral exports to 2022, which is also the deadline for smelter development,” the ministry’s director general for mineral and coal, Bambang Gatot Ariyono, said recently.
Tamsil Linrung, the deputy chairman of House Commission VII, which oversees energy policy, criticized on Monday a lack of effort from the government to fully develop the potential of the country’s natural resources.
“The government has yet to succeed in utilizing the country’s full potential. […] Even if there’s a ban on raw material exports, efforts in the downstream sector have yet to become fully effective, as they have only reached intermediary products, not final products,” he said. Inalum head wants mineral exports curbed to ensure domestic supply (Stefanno Reinard Sulaiman, The Jakarta Post)