- Over a decade, they’ve poured upwards of $14 billion into two ore-rich islands to lock in supplies for battery production.
According to Bloomberg article published on December 16, 2022, about 3,000 miles south of Beijing, Chinese mining companies have set up operations in the heart of the world’s largest known nickel reserves. On the Indonesian islands of Sulawesi and Halmahera, they’ve built refineries, smelters, a new metallurgy school—even a nickel museum.
Together, they’ve plowed $3.2 billion into the remote islands this year alone, bringing the total to $14.2 billion in investment over the past 10 years—enough to secure their nickel supply into the next decade. The metal is primarily used in the production of stainless steel, but it’s also a critical component in electric vehicles. It makes up 90% of the cathode, the most expensive part of a high-performance battery, and there’s concern that demand will outstrip supply in the not-so-distant future.
That’s an issue for EV makers all over the world—Tesla Chief Executive Officer Elon Musk famously begged miners to “mine more nickel” on a 2020 earnings call—and particularly for China, home to the world’s largest market for plug-in vehicles. Chinese companies have been assiduous in locking in supplies of various battery components and, as a result, will dominate the supply chain for at least five years, according to BloombergNEF, a unit of Bloomberg. To break its reliance on China for nickel and other critical minerals, the US would need to invest almost $90 billion by 2030.
China has less than 5% of the world’s known reserves of nickel. So as it’s done with cobalt in Congo and lithium in South and Central America, it looked overseas, to a country eager for foreign capital and technical know-how. “China’s been ready and willing to invest in places where the US, European, even the Canadian, Australian companies haven’t gone,” says Michelle Foss, a fellow at Rice University’s Baker Institute Center for Energy Studies who’s researched China’s growing hold over nickel.
Indonesia has become an enthusiastic partner. President Joko Widodo is determined to wean his country off exports of raw commodities by forcing producers to do processing and manufacturing onshore. To that end, Jokowi, as he’s popularly known, banned outgoing shipments of metal ores in 2020, limiting exports to refined products. In the two years since, the value of Indonesia’s nickel exports has surged from $3 billion to $30 billion. “We want to benefit from added-value exports so that there’s income for the state in the form of taxes and new job opportunities,” Jokowi said in an interview in August in Jakarta. “We don’t just want to build batteries. This is just half of it. We want to build electric cars in Indonesia.”
Jokowi’s administration cast a wide net, but so far only the Chinese have been willing to sink large sums into production facilities. Australia, Canada, South Korea and the US combined have invested just $1.5 billion in Sulawesi and Halmahera over the past decade.
Part of the hesitancy may be because most of the nickel mined in Indonesia is a low-grade type used for stainless steel. Lithium-ion battery makers need Class 1 nickel, more than 99.8% pure. Until now, producers have been able to get it from richer nickel sulfide deposits, primarily in Australia and Canada, but as EV production ramps up, the race is on to develop new supplies.
To do that, Chinese companies are deploying a technology called high-pressure acid leaching (HPAL). It’s difficult, expensive and bad for the environment. But their bet is that nickel prices will stay high and the ores cheap, making HPAL commercially viable despite its steep cost. And neither Chinese investors nor Indonesia have been willing to prioritize environmental concerns over the potential economic boon.
GEM Co., a supplier to Samsung Electronics, and Contemporary Amperex Technology Co. (CATL), the world’s biggest EV battery maker, jointly started an HPAL production line in Indonesia in September. Tsingshan Holding Group, the world’s biggest producer of nickel and stainless steel, plans to supply 100,000 tons of a semi-refined product called nickel matte from its Sulawesi HPAL refinery to two Chinese companies.
“China has more metals upstream technology, and they want to share it with us,” said Luhut Panjaitan, Indonesia’s coordinating minister for investment and maritime affairs, during a flight to Sulawesi, four hours away from the capital, in September. “We have more nickel in Weda Bay, Buli, Bintan—you see how rich this country is.” After deplaning, Panjaitan toured the Morowali Industrial Park, home to a lithium-ion battery plant backed by Tsingshan and CATL, a refining facility run by Zhejiang Huayou Cobalt Co., and the site of CNGR Advanced Material Co.’s future smelting plant. Everywhere he went, banners saluted him in Mandarin and Indonesian.
Elsewhere, Chinese companies have encountered more resistance. Australia, Canada and the US are stepping up scrutiny of foreign investment in critical materials tied to electric cars and clean energy. The Philippines—also home to large nickel ore reserves—has been chilly to China following its alleged incursions in the South China Sea.
Not everyone in Indonesia is thrilled about the tie-up, either. As China’s presence has grown, so has the number of migrant Chinese workers, and they’ve become a flashpoint in an already competitive job market. Both countries have tightened permit requirements for Chinese workers in Indonesia in an attempt to quell some of the discontent.
Ultimately, China offers Indonesia more than a hand up the nickel value chain. It’s sharing a playbook, one Jokowi seems happy to follow: Open your arms to foreign investors, under the condition that they share intellectual property and put money into training and development. That strategy was critical to China’s own development in the late 1990s and early 2000s.
When Chinese President Xi Jinping met Jokowi in November, he proposed a relationship rooted in the idea of “same fate, same burden,” an allusion to their shared challenge: Both countries are trying to get rich before their population gets old.
