The future is nickel in Indonesia

Indonesia’s nickel industry is booming. The global adoption of electric vehicles (EV) is driving demand for the metal, which is a key element in many EV batteries.

In 2023, Indonesia produced a massive 40.2% of the world’s supply, sparking hopes the country can leverage its nickel reserves as a base to build a domestic EV industry.

At the same time, the nickel boom has courted controversy. In September, the US Department of Labor reported that forced labor was being used in the Indonesian nickel industry. Nickel companies have also faced accusations of environmental destruction and pollution

Geopolitics is also at play. Chinese technical expertise, investment and markets have been central to the development of the Indonesian industry.

American industrial policy in the form of the Inflation Reduction Act has aimed squarely at Chinese dominance of supply chains for green materials – limiting the access of Chinese-made goods to US markets.

Meanwhile, technological changes like the mass adoption of cheaper lithium iron phosphate (LFP) batteries for EVs – which use no nickel – pose further challenges.

In a wide-ranging interview with Asia Times contributor Joseph Rachman, Indonesia’s Deputy of Investment and Mining Coordination to the Coordinating Minister for Maritime Affairs and Investments Septian Hario Seto, the government’s point person on nickel policy, made the case for optimism and the nation’s plan to become a battery-making powerhouse.

AT: Where next for Indonesia’s nickel industry?

SHS: The next step, I think it’s to build an ecosystem for electric vehicles. So not only talking about nickel. We’re talking about cobalt and manganese. We’re talking about LFP (lithium iron phosphate). We’re developing an LFP factory in Indonesia. We develop copper, aluminum.

AT: How far along are you with this?

SHS: Our first pCAM [precusor material for battery cathodes] factory was commissioned this September, last month. We’ve built now two lithium refineries in Indonesia. I think they will be completed end of this year or early next year.

Even though we don’t have the lithium mine, we import it from Australia and Africa. And, even some from Latin America. We’ve already built the copper foil factory for the battery – built and operated already next to the Freeport smelter in Gresik. So it’s already done. I’m not just talking about a plan. This factory is already in commercial operation.

We already have anodes. If you look at the market landscape now the biggest players in the world – number one, two, and three – are Chinese companies. So, we have this anode factory now in Java. I think if you remember, in early August, President Jokowi inaugurated this factory.

So, there’s only a few remaining processes we need to attract. And with anodes this is very fundamental. If you (have) LFP- or nickel-based batteries the anode is the same. So, if you already have the anode this ecosystem will be easier to attract. So, if you ask me outside of China, we now have the biggest capacity for battery materials in the world.

China, America and geopolitical risk

AT: Why is China so central to Indonesia’s nickel industry? Does this pose a problem?

SHS: You need to understand on this, [in] nickel processing no-one beats China. Can you name me one Western company that has been very successful in developing this nickel technology?

AT: Maybe Japan’s Sumitomo?

SHS: Yes, but the (high-pressure acid leaching) HPAL that they built was so many years ago. They tried to build HPAL with Vale but failed.

[Vale signed an agreement to open a nickel processing plant in Indonesia in partnership with China’s Huayou Cobalt and America’s Ford in 2023.]

So, I think this is the problem. So how do you deal with this situation? So, what you see now is now a lot of non-Chinese firms are getting a partner or a Chinese technology provider. I’m talking specifically about HPAL.

So, we have one project, which I think will start commercial operation this quarter, where the Chinese only control less than 25%. It’s about 20% if I’m not mistaken. The Indonesian shareholder controls 60% the South Koreans will control about 20%. So, you will see this type of investment is happening more and more.