Indonesian alumina plant to get US$ 500m investment from Russia’s VI Holding

Russian Trade Minister Denis Manturov confirmed the US$500 million investment in Indonesia during a media interview in Jakarta.

Russia’s industrial group Vi Holding will invest US$500 million (RM1.6 billion) in an alumina refinery in Indonesia that could be built in the next three to four years, Russian Trade Minister Denis Manturov told Reuters today.

Southeast Asia’s biggest economy introduced a controversial mineral ore export ban in January, aimed at forcing miners to move up the value chain by processing minerals in Indonesia.

The halting of US$3 billion of annual nickel ore and bauxite exports lifted the price of nickel and helped support aluminium, boosting the fortunes of Russia’s United Company Rusal and Norilsk Nickel.

The new alumina plant is expected to have a capacity of 1 million tonnes per year with shipments bound for China, said Manturov, after meeting with new Indonesian President Joko Widodo in Jakarta.

“In Indonesia, they (Vi Holding) 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.”

The Indonesian alumina project will use Russian technology and is estimated to be completed within three or four years with annual production of about 1 million tonnes, added Manturov.

Vi Holding’s investment follows on from aluminium giant United Company Rusal, who in February said it wanted to make Indonesia a regional hub for its alumina production.

Russia ranks number 14 among Indonesia’s top import markets, according to Indonesian trade ministry data, with total trade between the two countries worth US$1.3 billion from January to July this year.

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Other trade and economic items discussed with Indonesia’s newly inaugurated president included Russian oil exports, Indonesian oil refinery construction, port infrastructure and military equipment sales, Manturov added.

“Our Indonesian partners are interested in participation of their local military industries in joint co-operation and production with Russian partners,” he said. “We are ready to promote and further develop this kind of joint co-operation with Indonesia.”

Indonesia has sharply increased its defence budget since 2010 as the military looks to bolster its capacity to protect shipping lanes, ports and maritime boundaries.

In March last year, defence officials in the Southeast Asian nation said it planned to buy more than a dozen Russian Sukhoi fighter jets as part of a US$15 billion five-year campaign to modernise its military.

Russia’s economy has slowed due to the tumbling oil price and after it faced several rounds of US and EU economic sanctions over its involvement in the Ukraine crisis.

The country is actively looking to build greater economic ties outside of Europe and the United States, and Manturov said he hoped his trip would help strengthen bilateral trade with Indonesia.

Sanctions on Moscow, a weakening rouble and a Russian ban on food imports from a number of Western countries have pushed annual consumer price inflation higher.

The weak rouble would lower the cost of production for many industries and benefit local buyers, said Manturov, adding that the sanctions would also help develop Russian technologies.

Restrictions within financial markets had caused difficulties for conducting some financial and monetary activities, he said, but that Russia was looking to develop schemes using local currencies with its partners in Southeast Asia and the Middle East.

The rouble has shed about 20 per cent against the dollar this year, and the immediate catalyst for the breakneck descent is the tumbling price of oil, Russia’s major export. — Reuters

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