PT Inalum faces financial crisis due to slump in aluminum price

MEDAN, North Sumatra (JP): Steady declines in prices and production, and increases in operational spending have thrown PT Indonesia Asahan Aluminum (PT Inalum), a aluminum-smelting joint venture between Indonesia and Japan, into financial crisis.

"We are now suffering from difficult financial circumstances, due largely to depressed aluminum prices on the international market and heavy financial burdens," the company's president, T. Saito, told reporters after a signing a collective labor agreement (KKB) with the company's workers here yesterday.

The signing ceremony was attended by Director General for Industrial Relations and Labor Standards Suwarto, the head of the provincial manpower office, Khairun, Secretary General of the Association of Indonesian Businessmen Ferdinandus, Chairman of the All Indonesian Workers Union (SPSI) Imam Sudarwo and Sumaryo, an official of the Asahan Authority Board.

Japanese Prime Minister Tsutomu Hata recently dismissed a news report that the Indonesian government has asked the Japanese Ministry of International Trade and Industry to salvage the ailing company, saying that the Indonesian government never made such a request.

The Nihon Keizai Shimbun, a leading financial daily in Japan, reported last month that the Indonesian government has asked the Japanese side to shoulder a major part of a capital increase that the joint venture is planning. They also reported that the Indonesians had asked Japan to lower the interest rate on their loan of $1.8 billion to the alliance.

Price

Saito said yesterday that the financial difficulties have affected the company since 1984 when the aluminum price on the world market decreased sharply from US$2,000 to $1,300 per ton. "Aluminum prices since then have remained low," he said.

He said the sharp fall of the price of aluminum was caused mainly by increased production in members of the Commonwealth of Independent States, especially Russia.

However, he expressed optimism that the aluminum price would likely increase in the coming years.

The price has increased slightly to $1,340 per ton in the last three months, he said.

The joint venture, established in 1976, is 60 percent owned by Nippon Asahan Aluminum Co. Ltd. of Japan and 40 percent by the Indonesian government.

The firm, whose smelting factory was located in Kuala Tanjung, Asahan, some 200 kilometers southeast of the provincial capital, started manufacturing in 1982 and is one of the largest aluminum- making footholds for Japan.

Saito said the company's aluminum production slightly increased to 220,000 tons last year from 200,000 tons in the previous year.

"This year's production is expected to increase," he added. (rms)