Case Study: Tsingshan Industrial Parks in Indonesia Post-China’s Coal Pledge
30 November 2021 – by Aiqun Yu
Last updated on 02 December 2021
Since China’s Road and Belt initiative began implementation, it has developed several industrial parks across the globe. The only problem: many of them run off coal, including major industrial parks scattered across Indonesia such as Tsingshan Industrial Parks. Roughly speaking, most of these parks only began operation in 2015. But these parks present challenges in light of the “no coal power overseas” pledge by Xi Jinping, China’s president, and Indonesia’s commitment to no new coal power between 2021 and 2030.
China and Indonesia’s resource relationship runs deep. Indonesia’s nickel laterite reserves are second only to China. However, China’s overstretched iron, steel and aluminium industries – along with strengthened environmental regulations – forced Chinese companies to look elsewhere.
Indonesia was their primary target to mine and produce nickel, iron, and aluminium oxide. There were reportedly around 30 Chinese companies, both state-owned and private, scouring Indonesia’s islands seeking mining opportunities. And Tsingshan Industrial Parks in Indonesia stood out.
Tsingshan began in Wenzhou in China’s Zhejiang Province, with its governing body named the Tsingshan Industrial Board of Directors (青山实业董事局). Five parent groups sit under it that oversee over 300 subsidiaries. Tsingshan Holding Group (青山控股集团), Shanghai Decent Investment Group（上海鼎信投资集团) and Eternal Tsingshan Group. (永青集团) are those embedded in international business.
In 2009, Tsingshan started exploring Indonesian markets. Shortly after, Tsingshan received an invitation from Bintang Delapan Group, an Indonesian mining company, to jointly develop and operate a nickel laterite mine. Indonesia’s PT Morowali Industrial Park was born and broke ground in Central Sulawesi’s Morowali in October 2013. Together, 66.25% is owned by Shanghai Decent and Bintang Delapan Group owns 33.75%.
Morowali Industrial Park is also responsible for the development of coal power plants as an infrastructure service. Usually, tenant companies hold the majority of shares in these plants. According to Global Energy Monitor, a non-profit organisation tracking global coal projects, 2,510 MW of coal power came online in 2015 at the park. Along with Morowali’s independent grid, a further 3,380 MW expansion is now on the table.
In 2018, Tsingshan established another industrial park in Weda Bay, following the Morowali Industrial Park’s model. Over 3,400 MW of coal power to provide energy for Weda Bay’s park is beginning its operation. Starting in June 2021, 1,000 MW is already online, with 1,640 MW under construction.
Weda Bay’s industrial park is already making ambitious plans to construct a complete chain for laterite nickel-iron to stainless steel. This mirrors already established and future industrial parks like the proposed one in the Northern Konawe Region in Southeast Sulawesi. Despite Chinese and Indonesian pledges on drifting away from coal, all energy at these parks will originate from coal.
On the next day day after Xi Jinping broadcast China’s pledge on not funding or building coal power plants overseas in October 2021, Tsingshan published their pledge on their website, in line with China’s national goals.
Despite the pledges, 1,520 MW worth of coal would jumpstart another Tsingshan aluminium production project. However, Tsingshan also reported its wishes to develop non-coal based industrial parks in Indonesia’s Borneo. Instead, hydropower, wind, and solar would make up the difference. The Tanah Kuning Industrial Park in North Kalimantan sought just that, with a USD 28 billion investment into hydropower.
As China and Indonesia make ambitious carbon emissions pledges, along with setting coal phase-out goals, these industrial parks run counter to their logic. As the industrial parks’ reliance on coal continues, a close eye on their development is vital. There is room for improvement and worryingly, industrial parks like Morowali, for the time being, continue to belch out yet more carbon emissions.
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