Indonesia must balance aluminum supply chain, learn lesson from nickel: experts

Indonesia must adopt a balanced, integrated approach to its aluminum supply chain to avoid repeating oversupply pressures that have weighed on the nickel market, industry experts said June 4 at the 2026 Indonesia Critical Minerals Conference in Jakarta.

Indonesia emerged as the world's leading nickel producer after a 2020 ban on nickel ore exports prompted predominantly Chinese capital into domestic processing facilities. The Southeast Asian country produced 66.6% of the world's mined nickel in 2025, according to S&P Global Market Intelligence data.

However, Indonesia's nickel output also oversupplied the market, dragging prices down and prompting the government to restrict production in 2026.

Adopting the same strategy as nickel, Indonesia is also becoming a key player in the aluminum supply chain, expanding refining and smelting facilities after prohibiting exports of bauxite ore in 2023. Experts said it must manage the buildout of its refining and smelting capacity and develop downstream fabrication capabilities to support a sustainable industry.

"We have learned our lesson from what happened in nickel," said Eddy Permata Purba, commercial and business development director at PT Borneo Alumina Indonesia. "We don't want to repeat that again in the aluminum industry."

The industry should prioritize stronger coordination between bauxite miners, alumina refineries and aluminum smelters to prevent market imbalances, Eddy said.

Novi Muharam, acting head of downstream strategy, research and process engineering division at state-owned mining holding company MIND ID, shared Eddy's sentiment.

Novi said Indonesia's bauxite reserves are ample to support the long-term development of its aluminum supply chain. However, the feasibility of developing additional alumina capacity must be evaluated.

"We should be careful not to conclude that additional alumina capacity is automatically feasible," Novi said. "The opportunity is clear, but it must be tested commercially and technically."

At least seven primary aluminum smelters in Indonesia are expected to go online by 2030, according to Novi. Indonesia's growing smelter capacity, as well as smelter expansions abroad, could help support demand for the country's growing alumina supplies, Novi said.

However, Indonesia's additional smelter capacity could worsen its aluminum supply glut. The country's aluminum production may exceed demand by 6.5 million metric tons/year by 2030 from 2 million mt/year in 2026, according to Novi.

The growing supply surplus highlights the need for Indonesia to increase its downstream fabrication capacity, which is expected to remain relatively unchanged by 2030. Domestic conversion into higher-value semi-finished products could create export opportunities, boosting the value of Indonesia's aluminum industry, Novi said.

"This is why downstream development should not stop at refineries or aluminum smelters," Novi said. "Investments in fabrication capacity, stronger industrial partnership, product development, standardization, market development, and end-user alignment are also important."

Platts, part of S&P Global Energy, assessed the CIF Japan spot premium for 99.7% P1020/P1020A aluminum ingot at $360/metric ton plus London Metal Exchange cash June 4, unchanged day over day and up $10/mt from the previous week.