https://www.bloomberg.com/news/articles/2019-10-28/indonesia-will-trade-nickel-riches-for-an-electric-car-industry

Indonesia Will Trade Its Nickel Riches for an Electric-Car Industry

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Indonesia is dangling the world’s largest trove of nickel, a crucial metal for making electric cars perform better, to lure the auto industry into spending billions of dollars to transform the islands into a hub for the technology.

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The archipelago holds almost a quarter of all nickel reserves, valued today at about $350 billion, and has brought forward a ban on ore exports by about two years to keep more of that natural wealth at home. EV makers and battery producers wanting access to the raw material have to build in Indonesia to get it, triggering an influx of investments along the supply chain that could potentially jump-start a nascent domestic auto industry.

Nickel prices swung on Monday after an Indonesian official suggested exports of the ore would be suspended immediately. The next day, the country shelved the plan, saying that miners would instead be able to continue shipments to the end of the year subject to greater scrutiny of their cargoes.

Read more: Indonesia Shelves Early Nickel Export Ban for Tighter Inspection

Nickel helps cram more energy into cheaper and smaller battery packs, allowing EVs to charge faster and travel further between fill-ups. Demand for the material is forecast to leap by about 16-fold during the next decade, according to BloombergNEF, as global carmakers gradually sideline their gas guzzlers.

Spending on new nickel processing plants is predicted to total $20 billion by 2024, with projects involving China’s battery giant Contemporary Amperex Technology Co. Ltd., miner Vale SA and Japan’s Sumitomo Metal Mining Co. already advancing. Toyota Motor Corp., Tesla Inc., Volkswagen AG and battery maker LG Chem Ltd. also are scoping out opportunities, the government said.

“It could provide a once-in-a-lifetime opportunity for Indonesia,” said Jeffrosenberg Tan, head of investment strategy at broker PT Sinarmas Sekuritas. “It can be a key player in the most important industry globally in the future.”

Nickel is used in a battery’s cathode, one of the pair of electrodes inside a cell that keep the current flowing. The auto industry will consume more than half of high-quality, or Class 1 nickel, by 2030, displacing the stainless-steel market as the top user.

The greater use of nickel in EV batteries should mean automakers can deliver midsize cars by 2025 that are capable of traveling 600 kilometers (373 miles) after a fill-up, have a 15-minute charging time and need a pack that’s half the size of current equipment, Germany’s BASF SE said last year.

That shift also should trim the amount of expensive cobalt that’s required in a battery, said BASF, the world’s largest chemical company.

CATL, part of a project to produce nickel and cobalt on Sulawesi, declined to comment. LG Chem said it doesn’t currently have plans to move into Indonesia. Tesla didn’t respond to a request for comment.

Indonesia was the biggest shipper of nickel, with almost all of it feeding China’s stainless-steel industry.

President Joko Widodo, starting his second term, wants to generate more jobs in the fourth-most populous nation and create a $7 trillion economy by 2045. To that end, the government announced a pending ban on exporting unprocessed nickel ore -- and then moved it forward. The original cutoff date was 2022, but in September it was accelerated to January 2020, sending prices of the metal surging to a near five-year high.

China’s imports rose in response, suggesting users have rushed to secure material before January’s deadline. That prompted Indonesia’s most recent moves this week to bolster scrutiny of cargoes before the export ban is implemented in full.

“For nickel, we want raw materials to be processed in Indonesia,” the president, known as Jokowi, said in an Oct. 2 interview, after the first change. “We want added values.”

Jokowi said he was considering similar restrictions on other commodities, including those needed by EVs. “One by one,” he said.

For the EV industry, the potential rewards from setting up shop in Indonesia are significant. Carmakers are chasing growth in Southeast Asia as sales in China, the U.S. and Europe stagnate amid the trade war and Brexit.

This nation of 260 million people has one of the lowest car ownership ratios among major economies. Plus, the government wants 25% of all cars produced here by 2030 to be electric as it tries to improve energy security and reduce air pollution. That would equal 750,000 EVs.

Yet the country lacks sufficient technical expertise and infrastructure to challenge China, Japan and South Korea as an EV hub, Fitch Solutions said last month.

So nickel is being used as bait. Toyota and Hyundai Motor Co. are pledging to start EV programs, and battery makers expressed interest in adding production lines, the government said. That would help fend off Thailand, which is trying to become Southeast Asia’s auto powerhouse by developing EVs and autonomous vehicles.