Smoke rises on Sept 21, 2022, from a nickel smelter operated by China’s Virtue Dragon Nickel Industry in Konawe, Southeast Sulawesi. The government has maintained an export ban on nickel ore since January 2020 in order to develop Indonesia’s downstream industry. - AFP
JAKARTA: Indonesia may need to find a different strategy to achieve its aspiration of developing a downstream nickel industry, some experts say, as the electric vehicle (EV) industry looks to alternatives to the metal that the country has in abundance.
Andry Satrio Nugroho, an economist at the Institute for Development of Economics and Finance (INDEF), told The Jakarta Post on Tuesday (March 6) that rethinking the downstream policy was becoming increasingly important, as the shift from nickel-based EV batteries to lithium iron phosphate (LFP) batteries was expected to gain momentum in the rapidly changing market.
“The first thing we must do is estimate how long it will take to scale up our EV battery production. If we can only do it in 10 years, we will not be able to supply the market and the market will also have changed by then,” he said.
The most common type of cathode in EV batteries today contains nickel, manganese and cobalt (NMC) as well as lithium. Such batteries are commonly referred to as NMC batteries.
The relatively new LFP batteries, meanwhile, have iron cathodes, making them about 20 per cent cheaper than NMC batteries to produce. The alternative technology was motived by fluctuations in nickel prices in recent years.
Market research firm Power Technology Research (PTR) projected that LFP batteries would make up more than 50 per cent of the market by 2025, beating out NMC batteries, which had around a 70 per cent share of the market in 2021.
Despite Indonesia’s extensive nickel reserves, it remains uncertain whether nickel batteries will dominate EV growth in the country, an Institute for Energy Economics and Financial Analysis (IEEFA) report found last year.
The report also noted that three quarters of EVs sold in Indonesia in 2022 did not use nickel batteries, opting for cheaper, iron-based batteries instead.
Andry of INDEF said the government should consider developing domestic stainless-steel production given the country’s abundance of rotary kiln electric furnace (RKEF) smelters, which are used to produce nickel pig iron (NPI) and ferronickel, the main components of the alloy.
The majority of the country’s NPI and ferronickel is exported.
“If we’re aiming for downstream industry development, next is building domestic stainless-steel infrastructure,” he said.
A report by energy finance think tank Energy Shift Institute predicted that Indonesia would produce less than 0.4 per cent of the world’s total EV battery energy this year, a share it said could persist until at least 2030.
Despite Indonesia’s abundant nickel reserves, China is expected to dominate the world’s EV battery production until at least 2030, the report also found.
Krisna Gupta, associate researcher at the Center for Indonesian Policy Studies (CIPS) wrote in East Asia Forum Quarterly on Dec 7, 2023, that Indonesian incentives had largely led investment toward the stainless steel industry instead of batteries and that the government would have to introduce more targeted measures to develop a domestic EV battery industry.
Alternatively, Krisna wrote, the government could pursue electric two-wheelers, which would be easier to domestically manufacture and more affordable for local consumers. Indonesian Employers Association (APINDO) chair for manufacturing Bobby Gafur Umar said developing a stainless steel industry would be challenging.
He said the number of RKEF smelters had grown rapidly in the last two to three years but neither domestic nor global industry had been able to absorb their output, an issue exacerbated by a weaker global economy.
“Then again, who are the users? The global economy is contracting, so indeed, demand overseas is decreasing, not just for nickel,” Bobby told reporters on Tuesday, when asked whether Indonesian industry was equipped to absorb local NPI and ferronickel products.
Rachmat Kaimuddin, undersecretary for transportation and infrastructure at the Office of the Coordinating Maritime Affairs and Investment Minister, said the government had designed the downstream nickel plan to maximise the value added to the commodity within Indonesia.
He also maintained that nickel-based batteries would remain relevant.
“Regarding demand, frankly, technology is always developing. If we look at the technology, which is quite mature at the moment, some batteries use nickel and some don’t use nickel but iron. Yes, we’ll see, each battery chemistry has different capabilities,” he said in Jakarta on Tuesday.
“Well, let the market do the talking. In my opinion, we still have to continue this downstreaming because the need is much greater than just one or two things.”
Wen Wei Tan, an analyst at the Economist Intelligence Unit (EIU), said Indonesia needed to take into account the impact of LFP batteries on NMC batteries. However, each type had its pros and cons, as well as its own uses, he said.
“So it is our view that Indonesia’s downstream strategy remains viable, for now,” he said. - The Jakarta Post/ANN
