The recent big investments Chinese companies are making in Indonesian nickel mines are attracting renewed attention.
China’s CNGR Advanced Materials Co Ltd. announced on May 19 that it will expand its nickel matte business in Indonesia, partnering with Singapore’s RIGQUEZA International Co., LTD. A total investment of $1.26 billion will be put in a production line in Indonesia with an annual capacity of 40,000 tons of nickel matte. This is the second cooperation between the two companies in Indonesia. In 2021, the two sides signed a cooperation project agreement to produce 60,000 tons of nickel matte per year.
Nickel matte is the raw material for high-purity nickel sulfate, which is an important raw material for ternary precursors, the compound cathode material for ternary lithium batteries, CNGR said in its statement. The partnership is aimed at securing nickel resources to reduce the company’s cost of producing nickel ternary precursors.
In March, trading in nickel futures on the London Metal Exchange (LME) went awry, resulting in an $8 billion paper loss for Chinese company Tsingshan Holding Group. However, the suspension of trading and delivery by the LME caused a huge shock to the international metal futures market. As LME was acquired by Hong Kong Exchanges and Clearing Limited (HKEX) for HK $16.7 billion (about $2.3 billion) in 2012, its handling is suspected of helping Chinese companies avoid losses.
On April 4, the UK’s Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) issued a joint statement that the FCA will examine LME’s handling of the March 8 “Demon Nickel” incident, while the PRA will examine LME Clear (the LME clearinghouse).
China Invests Nearly $2 Trillion in Overseas Mining
China’s foreign investment in mineral products mainly focuses on petroleum and iron ore, but with the rapid development of the global electric vehicle market, the competition for vehicle battery manufacturing materials is increasingly fierce. Under the development trend of high nickel and low cobaltization in ternary lithium batteries, Chinese enterprises are stepping up their efforts to acquire foreign nickel resources.Nickel can increase the energy density of electric vehicle batteries, thus increasing the driving range between charges. Market Research firm SNE Research forecasts that global nickel demand for power batteries will roughly double by 2025 and be six times higher by 2030 compared with 2022, driven by the continued expansion of the electric vehicles market.
Indonesia is one of the world’s richest laterite nickel resources. The main reserves are concentrated on Sulawesi island and other nearby islands. According to statistics, about 70 percent of Indonesia’s nickel exports go to China.
Tsingshan Holding Group, which entered Indonesia as early as 2009 to develop laterite nickel mines, is currently the world’s largest producer of nickel metal. By 2018, Chinese companies had more than 50 nickel production lines in Indonesia, about half of which were owned by Tsingshan. The Group, along with other Chinese companies, aims to build a whole new energy industry chain, from nickel and cobalt ore development to battery cathode material production and battery application.
Indonesia Concerned About National Security
According to a 2022 report released by the United States Geological Survey (USGS), in 2021, Indonesia and Australia each accounted for 22 percent of the world’s proven nickel reserves, Brazil accounted for 16.8 percent, Russia 7.8 percent, the Philippines 5 percent, and China 3 percent.Indonesia accounted for 37 percent of the world’s nickel production in 2021, ranking first. It was followed by the Philippines with 13.7 percent and Russia with 9 percent. China produced just 4.4 percent of the world’s nickel in 2021.
In a May 17 report, the Center for Strategic and International Studies (CSIS) said there are signs that Indonesia is concerned about the potential impact of Chinese investment on its national security. Indonesia’s sovereign wealth fund set up in 2020, for example, excludes Chinese investors. Still, investment between the two countries has continued to climb in recent years, with Chinese investors particularly interested in Indonesia’s nickel ore that is used to make lithium-ion batteries.
The CSIS report argues that the United States and Europe should increase investment in three emerging markets: Indonesia, India, and Vietnam, which will help the United States and its allies protect their supply chains and prevent key technologies from leaking to rivals.
