New OPEC but for countries producing metals for car batteries • The Register

Indonesia is seeking to use its position as the nickel capital of the world to create a cartel with other like-minded mining empires, similar to how OPEC teams up to control the global crude oil market.

It’s at a time when demand for nickel is rising and the world is struggling to transition from fossil fuel automobiles to electric vehicles, not to mention when Europe’s energy crisis is deepening.

“I see merit in establishing OPEC to manage the governance of oil trade to provide predictability for potential investors and consumers,” Indonesian Investment Minister Bahlil Lahadalia said. Told the FT in an interview today. “Indonesia is exploring the possibility of forming a similar governance structure with respect to the minerals we have, including nickel, cobalt and manganese.”

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Indonesia is known to follow through on its trade threats. In 2020 it banned nickel ore exports in hopes of boosting processing and finishing on its own shores, creating jobs and attracting foreign investment, something its trading partners in the EU strongly contest. EU who wanted the raw product for their stainless steel production. Member States continued to slam the archipelago with a complaint to the World Trade Organization in 2021.

By then, however, from Indonesia’s perspective, it had achieved its goal: “Looks like we’re going to lose in the WTO, but that’s okay, the industry is already built,” said the Indonesian President Joko Widodo at an economists forum in Jakarta. in September this year, adding that regardless of the WTO’s decision in this dispute, Indonesia will continue its plans to impose similar export bans on other raw materials.

And here we are.

Nickel is one of the primary metals used in lithium-ion batteries used to power many automakers’ electric vehicles – with the exception of a few, including Tesla, which also use lithium iron phosphate (LFP) to hedge against high nickel and cobalt prices.

Among the 3D transition metals (this piece here of the periodic table), nickel ensures a higher cell voltage and continuous voltage profile, with car manufacturers recently increasing the percentage of nickel in the battery cathode to increase the range cars can go, about 33% to 60%.

According to commodity consultancy CRU, Indonesia generates 38% of the world’s refined nickel supply, mostly from pig iron, or RPI, which is used to produce stainless steel. Battery-grade metal (and there’s an intermediate step in between, nickel matte) isn’t yet bulk produced in the country, but it’s obviously looking to address that.

In the first seven months of 2022, mines in the archipelago increased production by 41% year-on-year, according to the International Nickel Study Group, which also noted that:

And indeed, Chinese companies – including metals giant Tsingshan – have invested heavily in Indonesian nickel, with new factories sprouting up all over the island of Sulawesi to convert nickel pig iron (not suitable for batteries) into nickel matte (the intermediate step before battery production). quality nickel sulphate).

China’s foreign direct investment in Southeast Asia’s largest economy reached $1.56 billion between July and September, according to data from Indonesia’s Ministry of Investment, which publishes a local economic newspaper. SCMP noted was “a sharp increase from $595.61 million at the same time last year…. [with] more than 1,150 new Chinese investment projects… recorded in the last quarter… Analysts said most were for downstream projects, refining minerals such as nickel before reselling them to factories in China.

Unlike OPEC countries, Indonesia relies on Chinese-owned processors. Therefore, while the local industry is boosted, it is difficult to see how it will conclude this OPEC-type agreement with the other producers of nickel, cobalt, manganese, etc. South Africa, which has 80% of the world’s manganese reserves, is in a similar position, with a lot of mining and processing carried out under the direction of foreign companies, including British-owned Anglo American. Nickel-mining Russia, cobalt-rich Zimbabwe and manganese-rich DRC are also said to be candidates for “battery OPEC”. At the end of 2020, however, estimates said the DRC’s mining sector was now 70% dominated by Chinese mine owners.

It might be time to take a closer look at what the members of the Organization of the Petroleum Exporting Countries already know: you have to have the means of production to pull levers on prices and supplies. ®