Indonesia is rapidly expanding its aluminium production amid global supply disruptions caused by the conflict in Iran, leveraging its abundant coal reserves to fuel new smelters despite environmental concerns. The move comes as aluminium prices have surged following fuel shortages and attacks that have hindered output in the Middle East, a region responsible for about 9% of global aluminium production.
Driven by these supply constraints, Indonesia aims to significantly boost its aluminium industry, targeting an increase in alumina output—from bauxite ore processing—to 32.5 million metric tonnes by 2030, and aluminium production from roughly one million metric tonnes in 2025 to 14.5 million metric tonnes by the end of the decade. This expansion is supported largely by Chinese investment, with Beijing-backed firms responsible for around 75% of planned projects in Indonesia. China, which currently produces 60% of the world’s aluminium, has imposed domestic caps to reduce pollution from smelters, prompting companies to shift operations overseas to countries with fewer restrictions.
The Middle Eastern aluminium sector has faced significant setbacks this year: production is expected to decline by 44% compared to 2025, due in part to energy shortages and infrastructure damage. Companies such as Emirates Global Aluminium and Qatar Aluminium Ltd have scaled back operations, while Aluminium Bahrain’s facilities were damaged by Iranian strikes. These disruptions have accelerated demand for alternative sources, making Indonesia a key player in the transition.
While aluminium is essential in numerous industries—from automotive manufacturing to electronics—its production is highly energy intensive and relies heavily on fossil fuels. Indonesia’s planned expansion involves the construction of approximately 32 off-grid “captive coal” power plants dedicated solely to aluminium smelters. These facilities, often developed by private companies, operate outside regular emissions monitoring, raising concerns among environmental observers about their impact on Indonesia’s carbon footprint.
Environmental advocates warn that the surge in coal-powered smelting contradicts Indonesia’s commitments to reduce coal dependency and mitigate climate change. Aluminium production globally contributes nearly 2% of annual greenhouse gas emissions, approximately 1.1 billion tonnes of carbon dioxide equivalent each year. The new facilities threaten to exacerbate emissions at a time when Indonesia’s industrial growth, including its significant nickel mining sector, is already placing strain on local ecosystems.
The Centre for Research on Energy and Clean Air (CREA) estimates that Indonesia’s current bauxite reserves may be exhausted within 12 years if all planned projects commence operations as scheduled. Chinese investment in the country’s aluminium industry is projected to increase from between US$5.5 billion and US$6 billion currently to around US$30 billion by 2030.
Indonesia classifies nickel and aluminium as “transition minerals” critical for clean technologies such as electric vehicles and solar panels. This designation provides companies a rationale for continued coal reliance, despite Chinese President Xi Jinping’s 2021 pledge to halt funding for overseas coal projects. Critics argue this constitutes a loophole that greenwashes polluting industries, obscuring the environmental costs associated with coal-powered production.
Although cleaner energy sources like hydropower could be used to run aluminium smelters, such transitions require more time and capital investment. Indonesia prioritizes rapid development to capitalize on shifting market dynamics resulting from the Iran conflict, a strategy some experts say undermines broader climate goals.
“The speed factor is really what is causing the havoc,” said Putra Adhiguna of the Jakarta-based Energy Shift Institute, pointing to the tension between industrial ambitions and climate commitments in the region’s evolving aluminium sector.