Recently on the blog I talked about how Indonesia, one of the world leaders in mineral ore export had banned just that in an attempt to increase local capacity through new infrastructure projects. Russia’s Vi Holding has just announced that it will be investing $500 million USD in an alumina refinery to be up and running in the next three or four years.
Russian Trade Minister Denis Manturov was in Jakarta recently and confirmed the investment. This could mean big changes in Indonesia. The ban was instituted in January in an effort to bring further investment to Indonesia in the form of processing plants and refineries that would add value to the raw ore they were exporting. If the ban worked, this would also help diversify the economy providing jobs beyond the mining jobs offered now.
This also brought $3 billion of nickel out of the market this year. Coupled with the sanctions on Russia which threaten the world’s largest producer, Norilsk Nickel, prices have skyrocketed.
The proposed refinery will process approximately 1 million tonnes of ore each year and will focus on export China, one of the world’s biggest consumers. “In Indonesia, they (Vi Holdings) will have a project for producing alumina, which will be exported to their industry in China,” said Manturov. “Total investment in China is US$3 billion and specific for Indonesia, their investment will be approximately US$500 million.”
Russia is 14th among Indonesia’s import markets, but this refinery may be the start of increased trade and cooperation between the two nations. Particularly at a time when the Russian currency is low, investment in the country is attractive to many lower-income nations at this point.
I look forward to seeing the developments in Indonesia over the coming years, particularly as this plant comes to fruition. With this investment only ten short months after their controversial ban, this may be proof that Joko Widodo’s plan has paid off.