Indonesia’s efforts to entice investments for creating an end-to-end EV supply chain ecosystem were hampered by Tesla ‘ decision to establish its electric vehicle ( EV ) car manufacturing in neighboring Malaysia. & nbsp,
By turning raw ore into higher-grade metal intermediates, Indonesia’s metal downstreaming policies aim to increase value by utilizing the huge nickel reserves and production of the nation. These higher-grade nickel intermediates are crucial parts that go into making EV batteries made of stainless steel and metal chrome manganese( NCM ).
Indonesia’s metal downstreaming policies andnbsp have been successful in luring investment. Indonesia outlawed the export of raw copper metal in 2020 in an effort to draw investment, primarily into nickel smelters. & nbsp,
A year later, the nation received downstream investments and commitments from Chinese companies totaling about$ 30 billion in the US. 43 metal boilers were already operating as of July 2023, 28 were under development, and 24 were in the planning stages.
Indonesia uses two smelting techniques to process its schist copper ore. One technique, which is suitable for Indonesia’s metal ore, produces metal swine iron, a crucial element in the production of stainless steel, using pyrometallurgical( class 2 ) treatment for lower-grade nickel grade. & nbsp,
Mixed hydroxide precipitate( MHP ), which is used in lithium-ion NCM battery cathodes, is produced during the other ( class 1 ) treatment for higher-grade nickel using a high-pressure acid leaching( HPAL ) process. Due to the rising demand for EV batteries, the majority of smelting opportunities have been made to produce group 1 high-grade metal NCM battery cathodes.
The recent trend of major EV manufacturers, including Tesla, to switch from using nickel to a mineral combination of lithium-iron-phosphate ( LFP ), however, is cause for concern. & nbsp,
These materials are more accessible and economical. If this change spreads widely, it might have a disastrous effect on Indonesia’s optimistic downstream plans.
It is helpful to compare these two cell types in order to evaluate the effect of EV suppliers switching from NCM to LFP batteries on Indonesia’s metal industry. According to a recent report, LFP batteries are approximately US$ 12 per kWh less expensive because the materials used are more accessible and rich.
However, compared to their NCM competition, LFP batteries do have a some drawbacks. Their lower driving selection( estimated to be about one-third less ), which is particularly noticeable in cold conditions due to LFP’s lower energy density, is one of their drawbacks. & nbsp,
Their lower disposal price is another disadvantage. The cost difference between NCM and LFP batteries is taken into account when calculating the price, which may result in a lower demand than originally anticipated.
The metal downstream business in Indonesia faces significant obstacles. & nbsp,
Second, it is necessary to properly mitigate economic harm caused by deforestation at mining sites, disruptions to nearby communities, and unsafe toxic mining waste management. For the great power power required by smelting plants, the business also heavily relies on fuel.
Next, it’s worrying that the nation relies too heavily on China for investment and business exposure. The majority of the copper processing facilities in the nation are run by Chinese businesses. & nbsp,
Tsingshan Holding Group, Zhejiang Huayou Cobalt, Ningbo Lygend( a CATL Group member ), Wuling Motors, and China Molybdenum Company are notable people. However, the dominance of China has been somewhat restrained by the expansion of huge South Korean companies like Hyundai Motors, LG Energy, and SK, as well as Taiwan’s Foxconn.
Finally, there is confusion as a result of the industry’s dual oversight by two ministers. The Ministry of Industry is in charge of keeping an eye on the upstream metal processing phase, while the country’s Minister of Energy oversees mining operations. & nbsp,
These two ministers often have different ways of interpreting and enforcing related laws. For Indonesia’s downstreaming plan to be effective, close cooperation and understanding between these two departments are necessary, which is difficult due to different historical goals.
There will be a number of coverage issues for the fresh 2024 administration. Indonesia may think about recalibrating the balance between its power and investment in class 1 and class 2 nickel processing if the anticipated switch to more cost-effective LFP batteries occurs. This entails concentrating more on creating and funding lower-grade metal pig iron for the production of stainless steel.
Indonesia should think about switching from an aggressive nickel export ban to a more adaptable Domestic Market Obligation ( DMO ) scheme, similar to those used for coal and palm oil. & nbsp,
This plan is well-known to the state and business people, making it perhaps simpler to put into practice. As state institutions develop over time, some sort of assurance for long-term investors regarding the source and a price range of organic ore may be taken into consideration.
Indonesia is the world’s largest copper supplier with the largest reserves, which contributes to the success of the nickel downstreaming policy. This might not be the case for other metals and commodities, necessitating more cautious implementation across various industries.
Indonesia needs to give inland plans in industries that have a greater influence on small businesses and job creation priority. If the nation wants to take advantage of its socioeconomic income, which will expire by 2040, this is essential.
Manggi Habir is a visiting fellow at Singapore’s ISEAS-Yusof Ishak Institute.
This post, which was originally published by the East Asia Forum, has been republished with a Creative Commons license.