Chinese nickel tycoon taps top global traders for aluminum push

A Chinese tycoon who helped transform Indonesia’s metals industry over the past decade is in talks with commodity trading giants Mercuria Energy Group, Glencore Plc and Trafigura Group to secure investments in his new $3 billion aluminum smelter.

A deal between Xiang Guangda’s Tsingshan Holding Group Co. and the trading houses over minority stakes in the Weda Bay industrial park smelter would provide the merchants with a share of output from the 800,000-ton facility, people familiar with the matter said, adding the talks were already advanced. They asked not to be named as discussions are not public.

For Tsingshan, the involvement of high-profile Western investors with a global outlook and client base could be helpful in securing the support of an Indonesian government that has soured on local mining billionaires, the people said. It would also help limit the group’s financial exposure, they added.

For the traders, it would ensure a new source of metal at a time when a war in the Persian Gulf — a region that accounts for around a tenth of global aluminum supply — has upended flows and underscored the importance of diversified sourcing. Emirates Global Aluminium PJSC, the region’s biggest producer, has said it could take as long as a year to restore full output at its Abu Dhabi plant following an Iranian attack.

Tsingshan — a company that has been key to Indonesia’s emergence as a dominant player in nickel — has typically partnered with local producers and leading Chinese metals companies. In aluminum, it has teamed up with Huafon Group and Xinfa Group to build and run smelters in both the Morowali industrial park, in Sulawesi and in North Maluku, home to Weda Bay.

Spending on the new aluminum project is expected to top $3 billion, including smelters and associated power-generation facilities, the people said. The project will be developed in two phases, each with a capacity of 400,000 tons, they added.

Officials at Tsingshan did not respond to requests for comment. Mercuria, Glencore and Trafigura declined to comment.

Tsingshan is also speeding up other aluminum projects to allow the group to step in at a time of supply upheaval. Two plants in Indonesia will add production capacity totaling about 600,000 tons a year as early as next month, the people said — earlier than a planned third-quarter target.

Xiang, whose giant nickel bet sent shockwaves through the London Metal Exchange in 2022, is one of a number of Chinese entrepreneurs boosting aluminum capacity in Indonesia. China, the world’s largest producer, has hit a domestic cap on output, pushing companies to seek alternative venues with cheap energy and accommodating policy.

Aluminum prices in London rose to a four-year high this week after US President Donald Trump’s blockade of Iranian ports threatened more disruptions to shipments from the Persian Gulf. Fees paid by Japanese clients to obtain aluminum have surged to the highest level in 11 years, while premiums paid in the US have also climbed.

The acute supply-chain disruptions have pushed Japanese auto-parts manufacturers into talks with Russian giant United Co. Rusal International PJSC for its high-end alloy products, Bloomberg reported last month. Other metal buyers usually dependent on the Middle East are looking for alternative suppliers in other regions, including Indonesia.

(By Alfred Cang)