LME Week: Indonesia eyes next commodity boom after dominating global nickel

Having established itself as the world's largest nickel producer, Indonesia is on the lookout for the next commodity where it can leverage its speed in project execution to replicate that success.

The country is set to take its nickel production to the next level, targeting 3.5 million mt in 2028, up from 2.6 million mt in 2025. At the same time, its copper output is expected to hit 1.2 million to 1.3 million mt -- surpassing levels seen before the Grasberg mine accident -- while aluminum production is scaling up as new capacity comes online, Platts, part of S&P Global Energy, heard at the Indonesia Critical Minerals Forum, part of the Oct. 19-23 LME Week.

Power and policy metal

"Which metal for Indonesia could be the next nickel? I think it's aluminum," Kwasi Ampofo, metals and mining specialist of BloombergNEF, said at the forum, adding that aluminum projects in the country get China's financial backing.

"China maintains a 45 million ton cap on its own primary aluminum production," Ampofo said. "Where else would they go for growth? Just like they did with nickel, all that capital that they would have invested domestically is coming to Indonesia."

Dany Amrul Ichdan, vice director of state-owned diversified mining company Mineral Industri Indonesia, or MIND ID, said that his company has established an alumina and aluminum ecosystem that produces 300,000 mt/year of the metal.

"With copper, the biggest constraint and opportunity is the ore body, the resource," Ampofo said. "Aluminum is different. Aluminum is a power and policy metal. If you have power and the right policies, those are exactly the two main ingredients you need for aluminum."

Yet other panelists noted that Indonesia's copper production could reach 1.9 million-2 million mt by 2035, and that three large porphyry deposits, including Vale's Onto project, could drive it further. Conversely, the rollout of primary aluminum capacity could be constrained if electricity generation and transmission fail to keep pace with soaring demand.

"The one thing about aluminum is that it consumes a lot of electricity, and electricity prices are becoming a political issue everywhere," the deputy CEO of Arsari Group and vice chairman of energy and mineral resources of the Indonesian Chamber of Commerce and Industry, Aryo Djojohadikusumo, told the panel.

Balancing electricity needs

Right now, the Indonesian state-owned electric company, Perusahaan Listrik Negara, or PLN, sees at least 8 gigawatts of demand from hyperscalers looking to build in Indonesia. This is while some parts of the country are experiencing rolling blackouts, he said.

"The challenge is this — we have huge bauxite resources ... but how do we build our aluminum smelter capacity while at the same time providing affordable electricity to the people, and to data centers?" Djojohadikusumo said.

PLN plans to spend $35 billion on the grid and transmission over the next 10 years. The Indonesian government, the sovereign wealth fund Danantara and the private sector must work together to ensure that the power program is implemented as planned, according to Djojohadikusumo.

"That way, we will show the world that Indonesia can deliver on becoming the next aluminum powerhouse of the world," he said.

Speed pros and cons

BloombergNEF's Ampofo showed little doubt that Indonesia could surprise the world once again, given how closely aligned the country's regulators and the private sector are.

"If I could summarize Indonesia's competitive advantage in one word, it would be speed," he said. "Looking eight years ago into how it would be possible for Indonesia to bring all that capacity that they said they would bring online within that short period of time, we all thought it was going to take 12-15 years, until Indonesia looked into nickel and then overnight, they added so much capacity. We'd never seen it happen in mining before."

But the analyst also cautioned that, paradoxically, speed could be a hindrance to progress.

"The faster you mine, the more you run out of your resource," Ampofo said, and added that the rapid growth in hydrometallurgical processing that is taking place in Indonesia tends to leave behind a lot of tailings, and tailings could impact the environment.

"The advantage of speed is that you get a lot done, but the disadvantage of it is that you also have to spend a lot of time and money to address the harmful parts of mining as well," Ampofo said.

"We generate a large volume of residues from all kinds of commodities we have," MIND ID's Ichdan said. Tailings, if they keep piling up and are not managed stringently, present a risk, he added, referencing the Mariana and Brumadinho tailings dams collapses in Brazil in the 2010s that released toxic mining residues and are considered among the worst engineering and environmental mine disasters.

Yet he highlighted waste heaps from the country's mining and processing operations not only as a risk, but as the most underappreciated opportunity.

"Residues have yet to be monetized," Ichdan said.

Recovering rare earths from tin tailings

Similarly, Arsari, Indonesia's largest tin producer, is looking at recovering rare earths from the tin tailings of its mines, according to its Deputy CEO.

The forum also urged the government to accelerate downstream industrialization.

Commenting on speed as Indonesia's key feature, Rachmat Makkasau, CEO of Amman Mineral and chairman of the Indonesia Mining Association, pointed out its flip side. He highlighted the wide gap in growth rates between the extraction and manufacturing industries, which has resulted in vast surpluses of mined metals over domestic demand.

"We are doing very well on building nickel and also copper smelters, but there is a disadvantage to that," Makkasau said.

"We are not ready to have all these products now, which is one of the biggest challenges in Indonesia. People can say we have this, and we have that, but in reality, we still export 80% of the mined products."

Copper miners don't want to be pressured into adding smelting capacity because midstream integration still lacks profitability, according to Makkasau.

"Converting concentrate to copper only gives you 4% value added," he said. "To get the value added, you need to develop the downstream industry."