Indonesia aims to dominate global EV battery production by 2027

Indonesia has undergone a significant transformation in its nickel industry, pivoting from producing mainly 'class two' nickel for steel-making to focusing on high-purity 'class one' nickel, essential for battery production. The country's exports of battery-related nickel products saw a decline between 2014 and 2022 due to an initial lack of capacity for producing battery-grade materials. However, the Indonesian government has set ambitious goals to enhance its position in the global electric vehicle (EV) battery market, targeting to become one of the top three producers by 2027, with a projection of achieving 140 GWh capacity by 2030. As part of this strategy, Indonesia has already initiated six High-Pressure Acid Leaching (HPAL) projects, enabling it to progress from being a supplier of raw ore to producing refined materials necessary for lithium battery cathodes. This transformation is crucial as it aligns with the increasing demand for battery materials, particularly from markets that require compliance with environmental standards, such as Europe and Japan. The U.S. has recognized Indonesia's strategic value in reshaping battery supply chains, especially as American firms seek alternatives to mitigate reliance on China's dominance in clean technology. Despite the country's ambitious plans, environmental concerns persist, particularly due to the fact that Indonesia's nickel industry relies largely on coal-fired power, leading to substantial carbon emissions. The production of each ton of nickel is estimated to generate approximately 58.6 tons of CO2, raising questions about the sustainability of its battery ambitions. Additionally, with significant coal plants in operation and proposed developments, critics highlight a mismatch between Indonesia's green aspirations and its carbon footprint. While Indonesia's industry growth presents business opportunities, particularly for U.S. firms aiming to diversify their supply chains, skepticism regarding the environmental impact remains a pressing issue. If Indonesia can successfully transition towards a model that prioritizes low-carbon battery materials, it may capitalise on the rising consumer demand for environmentally friendly products and maintain its competitive edge in a rapidly evolving global market.