In a significant development, the United States and Indonesia are set to engage in discussions regarding a potential minerals partnership focused on boosting the trade of nickel, a crucial component in electric vehicle (EV) batteries. The talks are slated to take place as Indonesian President Joko Widodo visits the White House for a meeting with US President Joe Biden, with both nations eyeing opportunities for collaboration in the burgeoning EV industry.
While the Biden administration remains concerned about environmental, social, and governance standards in Indonesia, it is actively exploring the prospects of a partnership. This includes consultations with US lawmakers and labor groups in the coming weeks to ensure that any deal aligns with US interests and values.
"It's important to note that there's a lot of work to do before we are able to formally announce negotiations on a critical minerals partnership," remarked one source closely involved in the discussions.
Indonesia, known for having the world's largest nickel ore reserves, is eager to develop its EV supply chain by harnessing its vast nickel resources. However, the Biden administration is placing a strong emphasis on ensuring that any nickel supply chain development in Indonesia adheres to stringent environmental standards, minimizing its ecological impact.
"The overall momentum is promising, but (we) don't want to minimize the fact that there is a fair amount of work to be done here," one insider noted.
Indonesia's nickel mining industry has faced criticism for causing heavy deforestation and water pollution. Consequently, the Biden administration is looking to address environmental concerns while advancing the partnership.
Under US guidelines issued in March, a certain percentage of critical minerals used in EV batteries must be produced or assembled in North America or with a free trade partner for EVs sold in the United States to qualify for tax credits. Indonesia currently lacks a free trade agreement with the United States, making these negotiations all the more significant.
Moreover, discussions are underway to prevent nickel extracted from Indonesia but processed in China from receiving US Inflation Reduction Act (IRA) credits, highlighting the complexity of the trade discussions.
The global market value of the nickel industry is estimated at $33.5 billion in 2022, despite oversupply in the market. The United States faces a looming challenge, as its sole nickel mine is set to close in the coming years, and the country lacks a nickel smelter. To mitigate these concerns and advance its goal of leading in EV manufacturing, the US government has provided substantial funding to companies like Talon Metals for nickel processing plants.
Talon Metals, for instance, received nearly $115 million in funding to establish a nickel processing plant in North Dakota, with plans to supply companies like Tesla Inc. However, domestic projects, including Talon's proposed Minnesota nickel mine, have encountered opposition, with some advocating for a stronger focus on approving domestic mining projects to secure the US supply chain.
The forthcoming discussions between the United States and Indonesia mark a pivotal moment in their efforts to foster collaboration in the EV industry and address the challenges posed by the growing demand for critical minerals like nickel. Both nations are poised to explore ways to ensure sustainable and mutually beneficial trade relations in this critical sector.