Resource-rich Indonesia is expanding its aluminum production to address supply disruptions caused by the conflict in the Middle East. The country relies on its abundant coal reserves to power newly built smelters—a move that runs counter to efforts to curb carbon emissions driving climate change.
Aluminum prices have risen as fuel shortages and attacks on infrastructure slow production in the Middle East. The metal is used in a wide range of products, from kitchen foil and electrical wiring to smartphones and automobiles.
Tight Global Aluminum Supply
According to commodity data provider Fastmarkets, the Middle East typically accounts for about 9% of global aluminum production, but the region's output this year is projected to drop significantly compared to 2025 levels.
Energy shortages have led Emirates Global Aluminium to withdraw from deals, while Qatar Aluminium Company has cut production.
Before the Middle East conflict erupted, aluminum traded between $3,150 and $3,250 per tonne. However, the conflict drove prices to a high of $3,780 per tonne in June. Prices are currently hovering around $3,400 per tonne.
Andy Farida of Fastmarkets noted that the conflict has increased the likelihood of other regions, such as Southeast Asia, stepping in to replace Middle Eastern production.
"When supply is so uncertain, end-users look for alternatives," he said. "The conflict has indeed accelerated this shift and put Indonesia on the map."
Indonesia Seeks to Boost Aluminum Output
Aluminum is one of the world's most widely used metals, and its production is highly energy-intensive. The process begins with bauxite mining; the ore is refined into alumina and then smelted into aluminum. According to the Centre for Research on Energy and Clean Air, Indonesia aims to quadruple its alumina production to 32.5 million tonnes by the end of the decade and increase aluminum output from approximately 1 million tonnes in 2025 to 14.5 million tonnes by 2030.
The Finland-based non-profit organization is tracking 32 planned off-grid coal-fired power plants—to be built by private companies—specifically designed to power aluminum smelters. These are known as "captive" coal-fired power facilities.
According to Syahdiva Moezbar of CREA in Jakarta, public data regarding emissions from such power plants is limited. "The boom in captive coal power across Indonesia is essentially untracked," he said. "That is why it is deeply concerning."
Such plans run counter to Indonesia's pledge to reduce coal usage. Coal is the most polluting major fossil fuel and a significant source of global warming emissions.
These plans also threaten to cause further environmental damage at a time when Indonesia's globally significant nickel industry is already sacrificing the local environment for the sake of industrialization.
According to the World Economic Forum, the aluminum industry accounts for approximately 2% of global annual greenhouse gas emissions—equivalent to around 1.1 billion metric tons of CO2 equivalent per year. This exceeds the total annual emissions of most countries.
CREA estimates that if all planned projects in Indonesia become operational by 2030, the country's own bauxite reserves will be depleted in less than 12 years.
Indonesia classifies nickel and aluminum as "transition minerals" because they are used in so-called clean technologies, such as electric vehicle batteries and solar panels. (Source: Sina Finance)
SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.
