Indonesian nickel has been added to the list of products that are made under forced labor by the US Department of Labor, potentially causing a major setback for the East Asian nation’s effort to become a major global supplier of sought-after battery materials for both Western and Chinese companies.
The report cites media coverage and numerous reports by Organizations on working conditions at the nickel smelters located on the islands of Sulawesi and Maluku in eastern Indonesia. It has no immediate constitutional or regulation ramifications.
Employees from both countries work in partnership with Chinese and Indian companies and patrol the industrial parks where they reportedly face unfair pay, forced extra, and constant surveillance. Foreign workers are also subject to restrictions on their actions and passport expropriation.
Staff who spoke to Asia Times in Morowali, a center of Sulawesi that has grown to be a hotspot for the business, repeated similar claims while also bringing up unsafe working conditions.
According to Muhammad Taufik, a contractor at Indonesia Morowali Industrial Park and a part of the Serikat Buruh Industri Pertambangan federation,” we’re dealing with not only rotating technology but also with economic issues like working at hills, which frequently leads to injuries.” ” Creation is prioritized over protection”.
Between 2015 and 2023, some 91 staff died in deadly workplace accidents linked to the copper processing market, according to studies by Trend Asia, a Jakarta-based organization that works on conservation issues.
The worst injury was in December 2023 when a furnace explosion killed 21 staff – 13 Indonesian and 8 Taiwanese. The Indonesian Association of Nickel Miners did not respond to Asia Times ‘ request for comment on the claims made by the Department of Labor and the staff.
The industrial gardens where the alleged abuses occur are at the center of Indonesia’s metal industry and the Indonesian administration’s business plan, which emphasizes adding value to minerals rather than exporting them as natural materials.
Many of the government’s designated national strategic initiatives have advantages, including faster regulatory approval and greater security from the military and police.
Visitors or workers who object to the environmental impact or working problems assert that they have been the subject of abuse and analysis from authorities. The US Department of Labor report provides more support for some people’s claims that Indonesia needs to tackle its metal industry.
The head of research at Jatam, a Jakarta-based NGO that tracks abuses in the mining industry,” We always demand an end to this crazy nickel project and a thorough evaluation of nickel downstream operations.” ” Because the social and environmental costs are too high.”
This, nevertheless, seems doubtful without an additional drive. The Indonesian government is betting greatly on a plan of “downstreaming” its ample supplies of copper ore as a way to growth. In 2023, Indonesia accounted for 40.2 % of global nickel production, according to S&, P Global research.
According to Macquarie research, Indonesia’s share may increase to as much as 75 % over the next four to five years as it continues to grow and other global producers are unable to compete with its prohibitively low prices.  ,
Indonesia is already nearly entirely in charge of the world’s production of MHP, a powdery green blend of nickel and cobalt that has become the preferred feedstock for many battery manufacturers.
Indonesia’s industry now finds itself caught in the crosshairs of both ESG ( Environmental, Social and Governance ) concerns and geopolitical tensions.
So far, the industry has been built as a Chinese-Indonesian partnership. China has provided the capital, technical know-how and markets in the form of its booming EV industry. Indonesia has supported the mines and used export bans and tax breaks to entice Chinese companies to build refineries in Indonesia.
The Indonesian government is currently making an effort to diversify and move further up the value chain to produce batteries and EVs in Indonesia. South Korean companies LG and Hyundai have also begun production in Indonesia along with Chinese battery and electric vehicle producers CATL, Wuling, and BYD.
With the exception of America’s Ford, Western refiners and automakers have dragged their feet on investing in Indonesia. Projects that have been rumored or questioned by companies like Tesla, Volkswagen, and BASF have either failed to materialize or have collapsed.
The industry’s negative impact on the environment and labor conditions have not improved matters. Due to the US-led “derisking” of their supply chains from China, an equally significant factor is the reluctance to work with Chinese companies.
Batteries and EVs are only permitted to receive generous tax credits under the US Inflation Reduction Act if they use minerals from nations that have no free trade agreements with America, which Indonesia does not. Subsidy conditions also severely restrict the amount of exposure these supply chains can have to Chinese companies.
Meanwhile, the European Union will soon launch a Battery Passport setting strict standards, including due diligence requirements, on social and environmental risks.
Senior executives at Indonesian nickel companies tell the truth, but senior executives say that Western companies are interested in working with them because their domestic governments’ regulations make it difficult to do so.
The latest US Department of Labor report will add to those complications. Discussions between the US and Indonesia to reach a” critical mineral agreement” to allow Indonesian nickel to enter US markets and receive subsidies have stalled.
Concerns about Chinese influence in Indonesia’s supply chain have also been raised by prominent US senators. Federal agency allegations of forced labor will only add more to the mix.
However, without Indonesian nickel, America will struggle to meet its goals for EV adoption and decarbonization, according to Tim Bush, chief battery materials analyst at UBS, who spoke to Asia Times earlier this year.
EV adoption is already falling behind projections in America, partially due to the relatively high costs of American electric vehicles, while more affordable Chinese vehicles are subject to 100 % tariffs.
However, Indonesia stands to lose out too. Iron phosphate EV batteries, which use no nickel and are cheaper, are gaining global market share.
Nickel and cobalt batteries with higher price tags will still have their place, but probably more so in wealthy markets like the US and Europe, where consumers are willing to pay extra for higher performance and wider range. Which means Indonesia’s nickel could soon be smuggled out of the markets where it is most lucratively in demand.