AIronically, one of the largest democracies in Asia, on which Germany and Europe rely as a partner country, is examining the establishment of a cartel for the most important components for the construction of electric cars and steel production: Indonesia’s government is thinking of establishing a cartel of the supplier countries for nickel and other battery raw materials. It could be structured similarly to the union of oil-supplying countries in the Organization of the Petroleum Exporting Countries (OPEC).
“Indonesia will become a leading producer of nickel products, including batteries for electric vehicles,” says President Joko Widodo. In the middle of next month his country will host the summit of the G-20 countries, the world’s most important industrial nations. It should also deal with supply chains, diversification and growing protectionism.
“I see the benefits of creating OPEC to manage oil trade and provide predictability for potential investors and consumers,” said Bahlil Lahadalia, the investment minister of Southeast Asia’s largest economy. “Indonesia is studying the possibility of creating a similar structure for the minerals we have, including nickel, cobalt and manganese,” the Financial Times quoted the minister as saying.
However, it will be difficult for Lahadalia: Indonesia is the largest nickel supplier in the world. But the second largest is Russia, followed by Australia and Canada, which are unlikely to agree to the cartel proposal. Jakarta has imposed an export ban on nickel ore since 2020. The aim is to bring more processing industry into the country and thus create more jobs.
However, a dispute with the World Trade Organization (WTO) is pending over this foreclosure. Indonesia also came under pressure, not only from Europe, when it imposed an overnight ban on palm oil exports in order to depress prices in its home market. However, Lahadalia clenches his fist: “We will not give in, we will not change our policy,” he announced.
China is investing heavily in building batteries
An agreement like that of Opec would be an extremely hard blow for the German automotive industry on the way to electromobility. The country of more than 280 million people produces almost 40 percent of the world’s nickel consumption. It will rise sharply: Australian mineral companies like BHP, which have returned to nickel mining, estimate that the world’s nickel consumption will increase twenty-fold by 2030. Indonesia’s nickel reserves are estimated to be around a quarter of the world’s reserves.
Already, however, complaints about environmental problems are getting louder and louder. The Nikkei news agency was just reporting on river water overheating and fish kills in front of a string of new nickel factories in Sulawesi’s Indonesia Morowali Industrial Park (IMIP), which works for Chinese conglomerates. They, in turn, supplied batteries to “Tesla, Volkswagen and BMW”.
Due to the jobs in the industry, the number of people around the IMIP has increased tenfold in just eight years to more than one hundred thousand. In total, projects totaling $29 billion related to the construction of automotive batteries are planned in Indonesia, Indonesia’s Coordinating Minister of Maritime Affairs and Investments Luhut Pandjaitan said. The vast majority of them are in the hands of the Chinese.
Indonesia has experience with the oil cartel: Until it became a net importer itself from 2004, the natural resource country was part of Opec. However, unlike most oil-producing countries, it does not have a state-owned company that could mine the mineral resources. Foreigners are currently doing this, especially for use in steel production, such as the Chinese company Tsingshan, the Brazilian ore company Vale or the Korean electronics groups LG and Hyundai. China tripled its investments in the growth market in the third quarter compared to the previous year.
Tesla founder Elon Musk had also tried for a long time to use nickel from Indonesia on a large scale for his vehicle construction or even to set up production there. As recently as summer 2020, Musk tweeted: “Nickel is the biggest challenge for strong, long-range batteries. Australia and Canada are quite well positioned. Nickel production in the United States is paralyzed. Indonesia is great!”
In the end, however, the government and the company boss did not agree. Environmental problems and the exploitation of workers spoke against a settlement. However, Tesla is now buying around $5 billion worth of nickel from Sulawesi, Pandjaitan explained.