EV transition drives Indonesia’s ‘dirty’ nickel boom

Financial Times

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In just four years, Indonesia’s nickel industry has undergone a transformation — becoming a pivotal supplier of the commodity critical to electric vehicle batteries. But, as its importance grows, so has the south-east Asian nation’s reputation as a producer of “dirty” nickel.

Indonesia is now the world’s dominant supplier of the metal, following a boom triggered by President Joko Widodo’s ban on exports of raw nickel ore, in a bid to force foreign businesses to invest in the country and set up domestic processing plants.

Chinese companies responded promptly, pumping in billions of dollars to secure supplies of a metal crucial to the transition away from combustion engines. This reshaping of the car industry has boosted Indonesia’s exports, brought in record amounts of foreign direct investment, and transformed its current account balance.

But critics say that has all come at a huge environmental cost and accuse the government of prioritising nickel extraction over the archipelagic nation’s rainforests.

They are now urging the industry and government to adopt more sustainable practices, pointing to the mass deforestation caused by mining and the almost exclusive use of coal-fired power stations to power nickel smelters. They also accuse processing plants of polluting water sources.

Sayyidatiihayaa Afra, a researcher at environmental group Satya Bumi, wants the government to put a cap on nickel production. “The most significant issue in the environmental aspect is deforestation in the high biodiversity area and in high carbon stock forest,” she says.

A recent slump in global nickel prices has brought fresh scrutiny to Indonesia. With the world’s largest reserves and its low costs of production, the country is expected to increase its dominance of global supplies as mines elsewhere scale back production in response to the drop in prices.

It already accounts for 57 per cent of the world’s refined nickel, and its share is forecast to rise to 69 per cent by 2030, according to Benchmark Mineral Intelligence.

Industry executives say they are under increasing pressure from Western buyers to act on coal use and other environmentally harmful practices.

In response to the criticisms, the government in Jakarta announced earlier this year that it would set out a “decarbonisation road map” for the nickel industry by early 2025.

“We should find the best way to accommodate all our objectives, not only economic, but also environmental,” says Nizhar Marizi, the director

The full article is available here. This article was published at FT Markets.