In 2022, Indonesia has become one of the biggest markets for automotive industry, including electric vehicles (EV). The government sets its eyes on the future of EV by exploiting its abundant nickel ore and producing nickel battery-related products.
Indonesia hopes to be the sole producer of nickel-based products as it produces 853,000 tons or one-third of global output. The United States Geological Service reported Indonesia’s nickel reserves to be 21 million tons, compared to the global reserve of 89 million tons in 2018.
Major EV developers have close ties with nickel project owners and become their potential off-takers. The government has shown its growing commitment toward renewable energy and zero emission by 2060. It has pledged on developing EV as the main transportation in the future. This commitment makes a good investment for nickel batteries for the future.
In 2022, Indonesia has a number of major battery-related nickel projects featuring high-pressuring acid leaching plants and one nickel matte plant. They are:
- Sorowako, South Sulawesi
- The Sorowako mine is one of seven nickel mining projects. It is a High-Pressure Acid Leaching (HPAL) based plant, with a proven stockpile of 65.57 Metric tons (Mt) from a total proven & probable stockpile of 112.6 Mt. The mining method uses calcining, granulation, smelting, dry screening and rotary kiln or electric furnace, to mine laterite and breccia.
- Shareholders: PT Vale Indonesia (44.34%), Sumitomo Metal Mining Co., Ltd. (15.03%), PT Indonesian Asahan Aluminium (Inalum) (20%), Sumitomo Corporation (0.14%) and the public (20.49%).
- Potential off-takers: Tesla.
- Pomalaa, Southeast Sulawesi
- The Pomalaa plant is an HPAL nickel processing facility, known as the Pomalaa HPAL project. Using its technology to configure processing limonite ore and low-grade saprolite ore from Vale Indonesia mines in Pomalaa, it will produce Mixed Hydroxide Precipitate (MHP) with a potential production capacity of up to 120,000 Mt of nickel per annum. Meanwhile, both the Zhejiang Huayou Cobalt (ZHC) and Vale will ensure to minimize carbon footprints and not use coal-fired power plants for the HPAL project. There are also plans to make a rotary kiln-electric-furnace (RKEF) facility to process saprolite at the mine.
- Owners: Zhejiang Huayou Cobalt (ZHC) and Vale Indonesia. The total investment in the mine, factory and other facilities are valued at US$4.5 billion. Vale will acquire about 30% of shares from the project. The company’s shareholders consist of ZHC (53%), Vale (30%) and Ford (17%).
- Potential off-takers: Ford.
- Indonesia Morowali Industrial Park (IMIP) in Central Sulawesi
- IMIP is an industrial center for integrated mining of nickel ore estblished in 2013. IMIP is led by Alexander Barus as the CEO of PT IMIP Group in 2022. The company produces nickel, stainless steel and carbon steel. Recently, Vale and ZHC invested US$1.94 billion (IDR 28 trillion) in the IMIP mining nickel ore. The first phase investment reached US$140 million. In 2021, IMIP planned to invest in a smelter worth US$1.8 billion. IMIP has an area of 22.699 hectares with several blocks. It is part of the national strategic projects in 2021. In 2022, there were investments worth US$15.3 billion and export realization at US$10.7 billion in 2021.
- IMIP is a joint venture of Shanghai Decent Investment (Group) Co., Ltd. (49.69%), Bintang Delapan (25.31%) and Sulawesi Mining Investment (SMI) (25%). Its current shareholders are ZHC, Tsingshan, China Molybdenum, CNGR Advanced Material Co., Ltd., Rigqueza International (30%), Contemporary Amperex Technology Co., Ltd. (CATL) and GEM.
- Potential off-takers: Tesla, Volkswagen (VW), Kia, Mercedes-Benz and BMW;
- Indonesia Weda Bay Industrial Park (IWIP)
- IWIP is an integrated industrial area and a national strategic project in the nickel smelting industry. IWIP’s mission is to conduct a green industry for sustainable development and minimize the emission of greenhouse gas. With an area of 1,000 hectares giving space for ferronickel, ferrochrome, stainless steel, coke plant, carbon steel plant and hydrometallurgical plants.
- Shareholders: CNGR Advanced Material and Rigqueza International.The company’s joint venture is worth IDR 11 billion in investment between Tsingshan Group (40%) through its subsidiary Perlux Technology, Huayou Group (30%) and Zhenshi Group (30%).
- Potential off-takers: Tesla.
- Obi nickel smelter
- Obi was constructed and owned by Harita Nickel with its subsidies PT Trimegah Bangun Persada and PT Megah Surya Pertiwi. It has a land area of 80 hectares and the allocated funds for the project is at US$650 million. The smelter is expected to produce about 780,000 tons per year of ferronickel that contains 10% nickel and is operated by PT Halmahera Jaya Produksi (PT HJF).
- Shareholders: Ningbo Lygend Mining and Harita Group.
- Potential off-takers: not known yet.
- Karawang New Industry City (KNIC)
- A Hyundai consortium made of Hyundai Motor Company, KIA Corporation, Hyundai Mobis and LG Energy Solutions cooperated with PT Industri Baterai Indonesia or Indonesia Battery Corporation (IBC) in constructing a battery cell factory in Karawang. PT HKML Battery Indonesia – which is a consortium of LG Energy Solution, Hyundai Mobis, Hyundai Motor Company and KIA Corporation – built this factory. The total investment by LG reaches US$9.8 billion or IDR 142 trillion, while US$1.1 billion of it or IDR 15.6 trillion will be used to develop EV batteries in KNIC.
- Shareholders: LG Energy Solution, IBC, Hyundai and Kia.
- Potential off-takers: Hyundai and Kia.
- Batang Integrated Industrial Park
- Batang Integrated Industrial Park has an area of 450 hectares with planned battery factories and others. At the same time, its second phase of expansion would be 1,000 hectares. The area will be an essential EV industrial area in the future. LG Consortium and PT Aneka Tambang (Antam) signed a joint venture in nickel mining with an investment value of US$9.8 billion.
- Shareholder: LG Energy Solution consortium
- Potential off-takers: Hyundai and Kia.
Market risk analysis
Firstly, the domestic market is currently unable to absorb copper cathode by copper derivative or downstream industries such as PT Smelting in Gresik, East Java. Only 50% of this can be absorbed by the local market such as from PT Freeport Indonesia. This is because the copper downstream industry in Indonesia has not yet fully developed. By 2024, Freeport does not know which market could absorb its new smelting products while its new smelter could only be operational for 20 years.
Djoko Widajatno, Executive Director of the Indonesian Mining Association (IMA), said he had no idea who could absorb the copper cathodes when Freeport’s and PT Amman Mineral Nusa Tenggara (AMNT)’s smelters began their operations.
Secondly, by halting raw nickel exports in 2019, there have been trading disputes between Indonesia and the European Union (EU) and the World Trade Organization (WTO). The government is unconcerned as downstream mining remains its commitment. It will deal with certain policies undermining the EU’s effort in importing nickel products from Indonesia. The nickel products includeferro nickel (FeNi), nickel pig iron (NPI) and nickel mattes, which comes from saprolite nickel. It is a high-grade nickel ore for raw materials such as the making of stainless steel and other processed derivatives. The dispute between Indonesia and the EU might be inconclusive of whoever will win and the outcome remains uncertain.
Thirdly, mining has caused significant environmental damage in Indonesia. In 2022, the Indonesian Forum for the Environment (Walhi) criticized environmental damage in South Sulawesi because of Vale’s mining activities. Walhi said the company’s activities had damaged a significant portion of the rainforest.
