The new smelter will be completed by the end of 2026. Credit: Oliver Bunic/Bloomberg via Getty Images.

China-based aluminium manufacturer Shandong Nanshang has announced its intention to invest $6bn in expanding its aluminium facility in Indonesia.  

In 2021, the company commenced a two million tonnes per annum (mtpa) aluminium oxide project in a special economic zone (SEZ) on the island of Bintan, which sits just south of Singapore in the Riau archipelago. The zone takes bauxite mined from the neighbouring Kalimantan region of the island of Borneo. 

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The investment will include the addition of a 250,000tpa aluminium smelter beginning construction this year. Shandong Nandang aims to add 1mtpa in capacity by 2028.

The site is currently powered by a 160MW coal plant within the SEZ but plans to construct an additional 100MW of solar power as part of the investment. Indonesia’s SEZ Secretary General Susiwijono Moegiarso stated that the Bintan SEZ will take 33.8% of its power from renewable sources by 2032.

China’s aluminium output reached record highs in 2022 after laws relating to power usage limitations were relaxed. However, restrictions are still in place, which is not the case in Indonesia. As such, Shandong Nanshang is just one of many Chinese companies investing in the South Asian country.

In December 2021, at the outset of the power limitations, a $2.7bn nickel smelter was unveiled in the country supported by Chinese investors. China is the biggest source of foreign direct investment in Indonesia with investment in the Bintan SEZ alone worth $1.16bn.

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A further explanation for the rise in Chinese mining projects in the country is Indonesia’s openness to receiving them. In 2020, Indonesia passed a law that streamlined the process of receiving business permits whilst also controversially repealing environmental and labour laws. 

The bill stripped back environmental and labour protections, as well as reduced corporate taxation, resulting in a 44% increase in foreign direct investment in the country over the coming year.