Indonesian Nickel – Future of Electric Vehicles
Indonesia holds the world’s largest nickel reserves with an estimated 21 million tons, which are roughly 22.5 percent of global reserves. The country is also the world’s top producer of metal, with production hitting 1 million tons in 2021.
Although 70 to 75 percent of all nickel usage goes towards the stainless-steel sector, there is increasing demand for the manufacture of electric vehicle (EV) batteries. This demand from electric batteries is expected to account for one-third of total nickel demand by 2030, particularly as countries worldwide look to lower carbon emissions and meet their net-zero targets.
Indonesian Government is aware of the huge economic opportunities this provides and is focused on increasing production capacities along the EV supply chain and become an EV battery production hub.
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, LG Group and Foxconn
Indonesian 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.
In an interview to media in February, 2023 President Jokowi said “I’m very confident this industry will grow quickly, will grow very fast”.
Indonesia 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.
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.
Indonesia’s success in its EV goals will have huge implications for the economy. First, higher investment will lead to faster economic growth.
More jobs will also be generated domestically, raising income and overall consumption levels. This will in turn raise demand for consumer goods and services, which will call for further investment in other sectors.
Auto exports will also likely be ramped up. Higher domestic value-added and exports will improve current account surplus, which will help stabilise the rupiah, leading to more stable capital flows and domestic inflation.
Indonesia’s medium-term growth prospects are bright, given its growing and young population. Success in its aim to be integrated in global EV supply chains has the potential to boost economic growth and wellbeing.
Indonesian government is now focusing on developing two nickel-based battery blends — namely, nickel-cobalt-manganese and lithium-cobalt-nickel-aluminum — which are two of the five most popular combinations for EV lithium-ion batteries in use today.
So concluding my analysis that Indonesia is on track to become the world’s nickel capital with new projects potentially lifting the country’s share of the important stainless steel and battery metal ingredient to a whopping 60% of global output later this decade.
