Indonesia’s bauxite reserves are estimated to reach 7.78 billion tons, according to Ferdy Hasiman, Executive Director of Indonesia Mining and Energy Watch (ISEW). If bauxite is sold in raw form, assuming a price of USD 40 per metric ton, its total economic value would amount to only USD 311.2 billion.
Bauxite, however, can be further processed into aluminum. Before reaching that stage, it must first be refined into alumina. On average, three tons of bauxite are required to produce one ton of alumina. Based on the available bauxite reserves and assuming an alumina price of USD 400 per ton, the potential economic value could rise significantly to approximately USD 1.037 trillion.
The next stage of processing is converting alumina into aluminum. This process requires two tons of alumina to produce one ton of aluminum. With an estimated aluminum output of around 1.29 billion tons and an assumed price of USD 3,000 per metric ton, the total economic value of bauxite downstream processing into aluminum could reach USD 3.885 trillion.
This is precisely what the Indonesian government is aggressively promoting today: transforming bauxite into alumina, and then into aluminum, in order to capture far greater economic value than simply exporting raw bauxite.
The key question, then, is who benefits from Indonesia’s bauxite downstream industrialization? And are there publicly listed companies whose shares stand to gain a meaningful portion of this value-added process?
