On Wednesday, September 2nd, resource-rich Indonesia is increasing its aluminum output to address the supply disruptions caused by the conflict in the Middle East. The country relies on its abundant coal reserves to power its new smelters, which runs counter to efforts to curb carbon emissions that contribute to climate change.
Due to fuel shortages and attacks on infrastructure, aluminum production in the Middle East has slowed down, causing its prices to rise. This metal is used in a wide range of products from kitchen foil, wires to smartphones and cars.
Global aluminum supply shortage
According to data from the commodities information agency Fastmarkets, the Middle East typically produces about 9% of the world's aluminum, but it is expected that the region's production this year will decline by 44% compared to 2025.
Energy shortages have led to the withdrawal of Aluniv from transactions in the United Arab Emirates and the reduction of production by Qatar Aluminum Company.
Before the outbreak of the conflict in the Middle East, the transaction price of 1 ton of aluminum was between $3,150 and $3,250. But the conflict pushed the price to a high of $3,780 per ton in June. Currently, the transaction price is close to $3,400 per ton.
Andy Faridah of Fastmarkets said that the conflict has intensified the possibility of other regions, such as Southeast Asia, replacing the production in the Middle East.
He said: "When supply is so uncertain, end-users will look for alternatives. The conflict has indeed accelerated this transformation and pushed Indonesia onto the map."
Indonesia seeks to increase aluminum production
Aluminum is one of the most widely used metals in the world, and its production is a high-energy-consuming industry. The production process begins with the extraction of bauxite, which is refined into alumina and then melted into aluminum. According to data from the Energy and Clean Air Research Center, by the end of this decade, Indonesia hopes to double its alumina production to 32.5 million tons and increase its aluminum production from about 1 million tons in 2025 to 14.5 million tons in 2030.
This non-profit organization based in Finland is tracking 32 planned, privately-owned coal-fired power plants specifically designed to supply power to aluminum smelters. These are called "exclusive coal power" facilities.
According to Syahdiva Moezbar of CREA in Jakarta, there is limited public data on the emissions of such power plants. He said: "The prosperity of these exclusive coal power facilities across Indonesia has basically not been tracked. That's why it is very worrying."
These plans run counter to Indonesia's commitment to reducing coal use. Coal is the most polluting major fossil fuel and is an important source of emissions that contribute to global warming.
At a time when Indonesia's global important nickel industry sacrifices the local environment for industrialization, these plans also threaten more destruction.
According to data from the World Economic Forum, the aluminum industry accounts for 2% of global annual greenhouse gas emissions, equivalent to about 1.1 billion tons of carbon dioxide equivalent per year. This exceeds the annual total emissions of most countries.
CREA estimates that if all the planned projects in Indonesia start operating by 2030, the country's own bauxite reserves will be exhausted in less than 12 years.
