COMMODITIES OUTLOOK
Nickel – ‘green’ risk of Indonesia By Tom Price, Head of Commodities Strategy at Liberum Rightly or wrongly, one motivation to buy an electric vehicle (EV) – rather than a conventional internal combustion engine (ICE) vehicle – is the promise that your decision might help pare transport-related emissions. This belief has been central to EV advertising pitches since these vehicles emerged in 2015 as commercial alternatives to ICEs.
W ith global EV sales set to grow by over 40% year-on-year in 2024 to almost 20 million units – representing 22% of all vehicle sales – the EV paradigm now seems secure. But there’s a glitch. Two-thirds of the batteries used in EVs feature nickel-bearing technology; almost 60% of the world’s annually-mined nickel is extracted from the rainforests of Indonesia; and commodity markets are just starting to price ‘green premia’, valuing the ESG credentials of traded metals (copper, aluminium, steel). So, what sort of premium could be achieved for rainforest- sourced nickel, requiring energy-intensive processes to isolate it from its lateritic matrix? Here, we look at the world’s growing dependency on Indonesia’s nickel exports, and explain how bat- teries now rival stainless steel as nickel’s first-use driver. Indonesia – centre of global nickel supply Over the past decade, Indonesia has emerged as the world’s larg- est source of nickel, the outcome of a national government policy enforced in 2014 – effectively directing foreign investors of its min- ing industry to build downstream processing capacity in-country. While many players have been involved in the development of
this mining hub (nickel, tin, copper, gold, coal), China has been the single-largest national investor in Indonesia’s nickel industry, via its ‘Belt-and-Road’ policy – almost US$20bn spent to date, with another $20bn pledged for broad-based infrastructure purposes, and to ‘strengthen ties’. As a result, Indonesia’s nickel industry has evolved from being a modest contributor to global supply (15%, pre-2009) to delivering an increasingly complex collection of refined products (nickel- bearing alloys, semis, powder, mixed-hydroxide, sinter, etc.) and stainless steel (>3mtpa; 300-series). Indonesia also has a pipeline of over 500 ktpa (>20% growth in total supply) of total high-pressure acid leach (HPAL) capacity being deployed before 2030, to supply the battery industry with nickel-/ cobalt-bearing feedstock. All up, Indonesia’s current rate of almost 2 mtpa of contained nickel production/exports represents 57% of the world’s mined nickel; 45% of its refined supply; 6% of total stainless-steel supply vs. 2014’s corresponding global shares of 8%, 1% and 0%. Rainforest resources Ok, so there’s spectacular industrial and trade growth being
reported for Indonesia’s economy. But do ‘green- minded’ EV drivers worldwide know that the nickel in their car’s battery probably comes from beneath a rainforest? For, Indonesia’s key nickel mining opera- tions are located on the tropical island of Sulawesi, with minor operations on the neighbouring islands of North Maluku and Kalimantan. To access and process Indonesia’s nickel-bearing lateritic ores (deeply weathered geology; high iron- and clay-content; grades 0.8-1.2% Ni), all operations require substantial rainforest areas to be cleared, before ore processing and overburden/waste dis- posal capabilities can be installed. To summarise the irony here: oxygen-producing, fauna-/flora-rich rainforests of Indonesia are being cleared to access a particular metal – that is being isolated by a massive, still-growing, coal-fired refining industry – used in EV batteries, which we’re told will help us reduce our impact on the global environment.
Two-thirds of the batteries used in EVs feature nickel-bearing technology.
8 MODERN MINING March 2024
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