The governments of the United States and Indonesia are planning to initiate a trade partnership on electric vehicle battery-grade nickel, Reuters reports, citing three people with “direct knowledge” of the matter.
Potential partnership
Indonesian President Joko Widodo is set to travel to the US to meet with President Joe Biden at the White House on Monday. As per the report, the agenda of the meeting will revolve around the potential nickel partnership as the two countries seek to advance their respective electric vehicle industries.
However, US officials apparently remain reluctant regarding Indonesia’s ESG (Environmental, Social, and Governance) standards.
That said, the White House is still exploring potential approaches and strategies to establish an effective agreement, with plans to seek lawmakers and labor groups’ insights in the following weeks.
“There’s a lot of work to do before we are able to formally announce negotiations on a critical minerals partnership.”
One of the sources
Indonesia leverages abundant nickel reserves
As EV-a2z previously reported, Indonesia holds the largest nickel ore deposits in the world. It currently houses about 21 million tonnes of nickel reserves, with production centered in the Island of Sulawesi and North Maluku Province.
The country leverages this edge to encourage the White House to initiate nickel trade negotiations that will enable exports from Indonesia to access the incentives of Biden’s Inflation Reduction Act (IRA).
It is important for Indonesia, as it currently has no free trade agreement with the US. According to The Diplomat, US guidances for the IRA’s tax credit set in April 2023 require a portion of the battery critical minerals to originate from a free trade agreement partner for the electric vehicle model to secure half of the $7,500 credit. The other half demands a particular portion of battery parts to undergo production or assembly in North America.
It is worth noting that the Southeast Asian country currently focuses its nickel reserves on crude metal processing. However, the global shift to electric vehicles urged the country to develop an interest in establishing a domestic supply chain through its nickel abundance, which is crucial for EV battery production.
US’ priority
One of the unnamed sources “who directly advised the administration” revealed that the US, involving the White House and Trade Representative Katherine Tai, primarily aims to ensure the lowest environmental impact from the production of any potential nickel imports in the country.
“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 of the sources
However, Indonesia’s nickel production is subject to accuses of significant water pollution and deforestation.
It is also worth noting that the White House is seeking to exclude any Chinese-processed nickel from the IRA’s EV tax credits, even if it is originally extracted from Indonesia.
Establishing a trade agreement with Indonesia is crucial for the US goal to dominate global EV production, as it currently has no nickel smelter. In addition, its sole nickel mine is also anticipated to shut down in several years. Likewise, it will also be a significant boost in Indonesia’s EV industry as its nickel supply will gain access to the US IRA’s incentives.
