Like Musk, nickel-rich Indonesia has high electric vehicle ambitions

LG

06/02/2023 06:05

By Fransiska Nangoy, Gayatri Suroyo and Bernadette Christina
       JAKARTA, Feb 6 (Reuters) - Armed with the world's
largest reserves of nickel and a ban on the export of nickel
ore, Indonesia is making itself indispensable for the electric
vehicle industry, which uses the metal extensively.
    In just three years, Indonesia has signed more than a dozen
deals worth more than $15 billion for battery and electric
vehicle production in the country with manufacturers including
Hyundai Motor  005380.KS , LG Group  003550.KS  and Foxconn
 2317.T .  
    Next up is the mammoth Tesla Inc  TSLA.O , the world's most
valuable automaker. President Joko Widodo has pulled out all the
stops to convince CEO Elon Musk to manufacture electric vehicles
or batteries in the sprawling Southeast Asian archipelago. 
    "I'm very confident this industry will grow quickly, will
grow very fast," the president, popularly known as Jokowi, said
in an interview last week.
    Indonesia has a total of 21 million tonnes in proven
reserves with nickel content, according to the U.S. Geological
Survey. That is nearly a quarter of the world's reserves.
    The country mined 1.4 million tonnes of nickel in
January-November last year, according to the International
Nickel Study Group. That's far ahead of the second-biggest
producer, the Philippines, which mined 290,000 tonnes in the
same period, and more than double Indonesia's output of 606,000
tonnes in 2018. 
    Jokowi banned exports of nickel ore in 2020, but allowed
export of higher value nickel products - forcing companies to
process and manufacture onshore. 
    Indonesia's exports of processed nickel then swelled to more
than $30 billion in 2022 from about $1 billion in 2015.
    Indonesia is expected to account for half of the global
production increase in nickel between 2021 and 2025, according
to the International Energy Agency, as demand for electric
vehicles surges. Each vehicle uses up to 40 kg of nickel.  
    "The Indonesian government is building a whole value chain
for servicing electric vehicle factories," said Victor Chin,
principal consultant at metal consultancy firm CRU.
    "So it only makes sense for Tesla to consider Indonesia,
both for a gigafactory and also for car manufacturing," he said.
    Musk's goal is to sell 20 million electric vehicles in 2030,
more than a 15-fold increase over the 1.3 million vehicles Tesla
sold in 2022. For that, it would need to build seven or eight
more "gigafactories" - facilities that produce electric car
batteries on a large scale - at an average of one every 12
months or so. urn:newsml:reuters.com:*:nL1N3011Z7
    Indonesia has similarly ambitious goals - Jokowi said in the
interview nickel exports can grow by 200 times from pre-export
ban levels of around $1 billion if the country successfully
manages to build the electric vehicle ecosystem. Brazilian
mining company Vale  VALE3.SA  has predicted a 44% jump in
nickel demand by 2030 from 2022 levels due to high demand for
batteries meant for electric vehicles.  
    Jokowi did not give a timeline for the exports growth but
said Indonesia was aiming to establish an integrated supply
chain for electric vehicle batteries by 2027.
    In other moves, Indonesia will also ban exports of copper
ore and bauxite in June, both of which are used in electric
vehicle production. 
    PERSONAL STAKE
    The nickel export ban has been challenged at the World Trade
Organisation by the European Union. The WTO ruled in the EU's
favour, but Indonesia has filed an appeal.
    But Indonesia's success has already prompted other countries
to emulate its steps, with the Philippines planning to tax
exports of nickel ore to encourage miners to invest in
processing.
    The development of the industry in Indonesia is a pet
project for Jokowi. He has taken it upon himself to convince
Musk to invest in Indonesia, holding talks with the Tesla chief
twice.
    Last week, Jokowi said he has even offered Tesla a nickel
mining concession and tax breaks to invest in the country, and
that he was confident a deal would be finalised. 
    While Tesla is looking for additional manufacturing hubs, it
has not commented on any firm plans in Indonesia. South Korea,
Canada and Mexico have also been trying to entice the carmaker. 
    The company has signed nickel sourcing contracts worth about
$5 billion from companies in Indonesia, a government official
has said. 
    One area of concern for potential investors is the nickel
mining industry's environmental impact and Indonesia's use of
coal for power generation. 
    The process of making nickel suitable for EV batteries has a
high carbon footprint and produces waste that environmentalists
fear could be dumped in the ocean.
    Still, global automakers are investing or sourcing from
Indonesia due to limited alternatives and booming demand,
analysts say. 
    "There is not enough nickel capacity expansion outside
Indonesia. Indonesian nickel production has grown its share from
less than 20% to nearly 50% in last four years," said ANZ's Soni
Kumari.
    Even buyers from the developed markets who are more
conscious of sustainability credentials will be forced to buy
from Indonesia, Kumari said. 
    "As battery-grade nickel demand continues to grow, battery
and auto companies cannot just ignore (criticism) that
'Indonesian nickel is not green enough' when most of the future
growth is going to come from Indonesia," she said.     
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
TIMELINE-Investments in Indonesia's nickel industry   
 urn:newsml:reuters.com:*:nL4N33Y2KK
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Fransiska Nangoy, Gayatri Suroyo and Bernadette
Christina in Jakarta, Mai Nguyen in Hanoi; writing by A.
Ananthalakshmi; Editing by Raju Gopalakrishnan)
 ((ananthalakshmi.as@thomsonreuters.com; Twitter:
@AnanthalakshmiA;))