U.S., Indonesia Discuss Potential Nickel Partnership to Boost Electric Vehicle Trade

The United States and Indonesia are set to discuss advancing a potential minerals partnership targeting the trade of nickel, a crucial metal for electric vehicle (EV) batteries. According to sources, these conversations will take place on Monday.

Reuters reported that during Indonesian President Joko Widodo's upcoming visit to the White House, he will meet with U.S. President Joe Biden to explore the next steps that could pave the way for formal negotiations on the partnership. Both countries are eager to explore the possibilities of this alliance.

Indonesia Seeks Trade Deal for Critical Minerals

Indonesia, the country with the largest reserves of nickel ore worldwide, has formally requested the initiation of discussions for a trade deal with the United States, according to Petromindo. Their objective is to have Indonesian exports of critical minerals covered under the U.S. Inflation Reduction Act (IRA), making it beneficial for both nations.

In its quest to establish an EV supply chain, Indonesia aims to maximize its vast nickel reserves. Currently, most of the nickel is processed into crude metal. However, the government is eager to transform it into battery materials, paving the way for the development of an environmentally sustainable industry.

Biden Administration's Concerns Over Environmental, Social, Governance Standards

While the Biden administration is keen on furthering these discussions, they remain concerned about environmental, social, and governance standards in Indonesia. The U.S. government is currently studying how a trade deal might function while ensuring adherence to these crucial standards.

The Biden administration's discussions revolve around ensuring that any potential nickel supply is produced with minimal environmental impact. Given concerns about nickel mining and its link to deforestation and water pollution, the focus remains on responsible sourcing and production processes.

Guidelines issued in March require a certain portion of critical minerals used in EV batteries to be produced or assembled in North America or a free trade partner. With no free trade agreement with the United States, Indonesia aims to identify alternatives to meet these requirements.

The Biden administration is also exploring options to prevent nickel extracted from Indonesia but processed in China from receiving IRA credits. Market estimates project a global value of $33.5 billion for the nickel industry in 2022; however, oversupply is a challenge to be addressed.

With the only U.S. nickel mine expected to close in the near future and no domestic nickel smelter to support EV manufacturing, the United States faces risks in achieving its goal of leading in this sector. Last year, the government awarded nearly $115 million to Talon Metals to fund a nickel processing plant in North Dakota, which will supply Tesla Inc. However, this initiative has encountered opposition from Indigenous communities.

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