In the context of the unprecedented changes in the world order over the past century, Chinese enterprises are accelerating their "going global" pace, with an increasing number of companies beginning to stand out in the international market, demonstrating strong competitiveness and influence. Particularly in the Southeast Asian region, as the Belt and Road Initiative continues to advance, economic and trade cooperation between China and Southeast Asian countries is becoming increasingly close, providing Chinese enterprises with broad development opportunities and bringing development prospects to the countries along the route.

As the largest economy in Southeast Asia, Indonesia's GDP reached 1.37 trillion US dollars in 2023, making it the only country in the Southeast Asian region to have broken through the 1 trillion US dollar mark. Coupled with the significant demographic dividend brought by a total population of 270 million and a median age of 30 years, Indonesia has become one of the hottest investment destinations.

A few forward-looking enterprises have already laid out their strategies here and are now entering the harvest period. On September 26th, Nanshan Aluminum Industry's subsidiary, Nanshan Aluminium International, officially submitted its application to the Hong Kong Stock Exchange, planning to go public on the Hong Kong Main Board.

Advertisement

As one of the top three alumina production enterprises in Southeast Asia, what are the highlights of Nanshan Aluminium International?

I. Behind the High Growth, Lies the Win-Win Cooperation

In 2019, Nanshan Aluminium International officially began the construction of alumina in Indonesia under the operating entity PT.BAI, and in just a few years, it has rapidly grown into one of the leading aluminum industries in Southeast Asia. This growth is inseparable from two advantages of the Indonesian market.

Firstly, Indonesia possesses unique resource endowments.

As is well known, bauxite is one of the core raw materials for alumina production, and an abundant supply of bauxite is a prerequisite for the rapid expansion of alumina production scale. By the end of 2023, Indonesia's proven bauxite reserves are about 1 billion tons, ranking sixth in the world and second in Southeast Asia.

Coal is the core energy source in the alumina production process and is also one of the significant advantages of the Indonesian market. By 2023, Indonesia's confirmed coal reserves reached about 37 billion tons, leading Southeast Asia and ranking sixth globally.

In addition, Indonesia's economy has been rapidly developing in recent years, especially with the continuous advancement of infrastructure construction and industrialization processes, which directly increases the demand for alumina and other aluminum products. At the same time, the Indonesian government actively promotes industrial transformation and upgrading, encouraging the development of downstream alumina and electrolytic aluminum industry chains. Previously, President Joko Widodo visited the production base of PT.BAI (PT.BAI is the main operating entity of Nanshan Aluminium International in Indonesia) and stated that "PT.BAI is one of the models for downstream businesses to boost the economy," which undoubtedly injects a "strong heart agent" for foreign investors, including Chinese enterprises, to participate in local aluminum industry projects.In addition to Indonesia's comparative advantage in resources, Nanshan Aluminium International's parent company, Nanshan Aluminium Industry, is firmly advancing its internationalization strategy, which is also an adjustment made in response to changes in the domestic market.

China is the world's largest producer of alumina and electrolytic aluminum, with a group of enterprises that have rich operational experience and technical reserves in the production of aluminum products. However, under the guidance of the dual-carbon goal, the supply-side reform of the electrolytic aluminum industry has capped the industry's production capacity, equivalent to adding a layer of restriction on the demand side for alumina.

The domestic production capacity needs to be transferred, and Indonesia just needs this force to help itself with industrial upgrading. Relying on mature skills and complete industrial operation experience, Nanshan Aluminium International has achieved leapfrog growth.

According to the prospectus, from the fiscal year of 2021 to the fiscal year of 2023, the company's operating income was 173 million, 467 million, and 678 million (unit: US dollars), with a compound growth rate of 98%. The good performance growth is mainly driven by the continuous increase in the company's alumina production. From the fiscal year of 2021 to the fiscal year of 2023, the company's alumina production increased from 0.47 million tons to 1.9 million tons, with a compound growth rate of 100.2%.

Profitability is also eye-catching. From the fiscal year of 2021 to the fiscal year of 2023, the company's net profit increased from $397.1 million to $1.74 billion, with a compound annual growth rate of 109.04%.

Against the backdrop of the global economy under pressure in recent years, Nanshan Aluminium International can still hand over such an eye-catching report card, once again verifying the correctness of its decision to go abroad.

Second, four major advantages build core competitiveness.

Choosing the right battlefield is important, but if you don't have your own strength, Nanshan Aluminium International won't become a giant in just a few years. Fundamentally, there are four advantages worth noting.

1) Strong shareholder advantage

Nanshan Aluminium International's parent company, Nanshan Aluminium Industry, is an A-share listed company with a market value of about 50 billion yuan. It has been deeply involved in the aluminum industry for more than 20 years and has a full industrial chain advantage. Its business scope covers thermal electricity, alumina, electrolytic aluminum, melting and casting, aluminum profile/hot rolling-cold rolling-foil rolling, waste aluminum recycling (recycling), etc. The deep industry know-how helps Nanshan Aluminium International to expand its business.Press Metal, as a leading integrated aluminum company in Southeast Asia, has entered into a 10-year alumina purchase agreement with Nanshan Aluminium International. Press Metal's annual demand for alumina exceeds 2 million tons, and it has the capacity to consume the vast majority of Nanshan Aluminium International's production capacity, contributing to the company's robust performance growth.

The controlling shareholder of Redstone Alumina International Pte. Ltd., the Santony family, has been deeply involved in Indonesia for many years, operating several bauxite mines and possessing a strong local raw material procurement network, which can provide Nanshan Aluminium International with a stable supply of high-grade bauxite resources.

2) Unique Geographic Advantage

Transportation is an indispensable part of the entire alumina production process. Nanshan Aluminium International's production and supporting facilities are located on the southeast coast of Bintan Island in the Riau Islands, Indonesia, at the gateway between the Pacific and Indian Oceans, controlling the strategic Malacca Strait shipping route, and capable of accommodating large vessels of up to 35,000 tons for cargo loading. Compared to other countries' alumina producers who often rely on importing bauxite from Australia and Guinea, Nanshan Aluminium International's geographic advantage allows it to directly obtain high-grade bauxite within Indonesia, significantly reducing transportation distances, which helps to improve transportation convenience and lower transportation costs.

This also makes "raw materials available on arrival" and "alumina produced and shipped immediately" distinctive tags for Nanshan Aluminium International.

3) Comprehensive Supporting Facilities

In addition to building its own wharf, Nanshan Aluminium International has also built its own power plant and reservoir, achieving self-sufficiency in water and electricity. This not only ensures the stability of daily production and operations but also reduces production costs and maintains sufficient profit margins.

4) Cost Advantage

Bauxite and coal, as the two core materials for alumina production, their price fluctuations have a crucial impact on the production costs of enterprises.

Indonesia has a surplus of domestic bauxite supply, with relatively low prices, and the high-grade bauxite used by Nanshan Aluminium International contains a higher aluminum content and lower impurities, which is beneficial for manufacturers to extract aluminum more efficiently. High-grade bauxite is suitable for the low-temperature Bayer process, with a calcination temperature about 90 degrees lower than the standard Bayer process, which can save energy consumption, simplify the production process, and reduce production costs.Coal is also subject to regulation by the Indonesian government, which requires at least 25% of the total annual production to be sold in the domestic market, benefiting from low coal prices.

Combined with the low transportation costs due to shorter transportation distances, and the low operating costs brought by self-sufficiency in hydropower, Nanshan Aluminium International has achieved a leading cost advantage in the industry, which ultimately translates into the company's strong profitability.

From fiscal year 2021 to 2023, the company's gross profit margins were 25.9%, 24.0%, and 29.2%, respectively, and even reached 42.2% in the first half of 2024, far exceeding the industry average. At the same time, from fiscal year 2021 to 2023, the company's net profit increased from $39.71 million to $174 million, with a compound annual growth rate of 109.04% during the period.

It can be seen that from production, transportation to sales delivery, Nanshan Aluminium International has a comprehensive layout, which allows it to firmly occupy the leading position in the Southeast Asian alumina market.

At the same time, facing the growing market demand, Nanshan Aluminium International is also continuously expanding its supply capacity and raising its own growth ceiling.

Based on the current design of 2 million tons, the company plans to double it to 4 million tons to achieve a stronger scale effect, thereby further reducing unit costs and improving profitability. It is reported that the new alumina production project is expected to increase the production capacity by 1 million tons in the second half of 2025 and the second half of 2026, respectively, which brings greater space for the company's performance growth in the next two to three years.

III. Conclusion

Nanshan Aluminium International has long seen the trend of China's aluminum product capacity transferring to Indonesia and has actively followed the trend to enjoy the early market dividends. With this first-mover advantage, it has established its leading position in the Southeast Asian market. This achievement is not only due to the rapid economic growth and market environment optimization in Indonesia but also the inevitable result of Nanshan Aluminium International's deep strength and strategic layout.

Of course, the huge opportunities in the Indonesian market will naturally attract more and more enterprises, and the competition in the Indonesian aluminum product market will gradually intensify in the future. However, Nanshan Aluminium International, with its first-mover advantage, has established certain advantages in production, transportation, and sales, which not only provide it with a continuous market leading position but also lay a solid foundation for the company's future growth.If Nanshan Aluminium International successfully lists on the Hong Kong Stock Exchange in the future, its brand influence and financial strength will be significantly enhanced, providing strong support for its capacity expansion and exploration of new markets.