The next OPEC-like cartel could be about battery metals
The world’s largest nickel producer, Indonesia, is considering the idea of forming a cartel to manage the supply of nickel and some other key metals for batteries, similar to what OPEC is doing for the oil. While the demand for battery metals such as nickel, lithium, copper and cobalt is expected to skyrocket in the coming decades to meet the increased demand for batteries for electric vehicles and energy storage. energy, the idea that some resource-rich countries would take advantage of their mineral deposits and seek to control part of the future market does not seem outrageous.
“I see merit in establishing Opec to handle the governance of oil trade to provide predictability for potential investors and consumers,” Indonesian Investment Minister Bahlil Lahadalia said. FinancialTimes in an interview published this week.
“Indonesia is exploring the possibility of forming a similar governance structure with respect to the minerals we have, including nickel, cobalt and manganese,” Lahadalia added.
Indonesia has yet to contact other nickel-producing countries to discuss the idea of a cartel, the Ministry of Investment told FT, adding that it was still working on a governance structure for the cartel. a future alliance that he could propose to other producers.
Easier said than done
Yet reproducing an OPEC-style cartel for so-called energy transition metals is easier said than done. Unlike the oil resources of OPEC producers, mining operations in Indonesia and other major nickel producers are controlled by various private companies or Chinese entities. Moreover, the largest producers and holders of nickel deposits are a diverse group of countries with vastly different political and trading conditions and unlikely to have common ground and common interests in forming a cartel. Apart from Indonesia, nickel producers include Russia, Canada, Australia, and the United States, although the United States does not have much in resources or production compared to Indonesia, the Philippines , Russia or Australia.
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Indonesia and Australia hold the largest nickel reserves, each with about 21 million tons, according to the US Geological Survey. Indonesia, however, is the top nickel producer, followed by the Philippines and Russia.
But Russia represents almost 20% of the world supply grade 1 nickel, which is the quality required for batteries, according to the International Energy Agency (IEA).
Nickel is mainly found in two types of deposits – sulphide and laterite. Sulphide deposits – mainly located in Russia, Canada and Australia – generally contain higher grade nickel which is more easily processed into Class 1 battery grade nickel. Indonesia, as well as the Philippines, have deposits of nickel laterite, which is lower grade and requires additional energy-intensive processing to become battery-grade nickel, the IEA said in a July 2022 report. reportglobal electric vehicle battery supply chains.
“Although Indonesia produces about 40% of the total nickel, little of it is currently used in the electric vehicle battery supply chain. The largest producers of Class 1 battery-grade nickel are Russia, Canada and Australia,” the IEA said.
Indonesia aims to develop its downstream nickel industry and has banned nickel ore exports in 2020. The move prompted an EU complaint with the World Trade Organization (WTO) against Indonesia’s decision to ban exports of raw materials used in the production of stainless steel.
Imagine what a reaction an Indonesia-led cartel for battery metals would receive in the EU, US, Canada and Australia, for example.
The Indonesian ban has also prompted Chinese companies to invest in Indonesia’s nickel supply chain. Chinese companies have invested and engaged some $30 billion in Indonesia’s nickel supply chain, with Tsingshan’s investments in Morowali and Weda Bay industrial parks being the most prominent examples, the IEA said in a report on the role of critical minerals in the energy transition.
Unlike OPEC producers, there is not a single state entity in Indonesia that controls nickel production. Tsingshan of China and Brazil Valley are the major nickel producers in Indonesia.
Additionally, a unit of Chinese battery giant CATL earlier this year signed a $6 billion deal with Indonesian companies to cooperate on EV battery integration project in Indonesia, which includes nickel mining and processing, EV battery materials, EV battery manufacturing and battery recycling.
Indonesia and its policies will be pivot for the qualitative and quantitative challenges of nickel supply, according to the IEA.
According to the IEA, most of the growth in nickel production in the coming years is expected to come from regions with vast laterite resources, such as Indonesia and the Philippines. These resources require more energy- and emissions-intensive processing to produce battery-grade nickel. High-pressure acid leaching (HPAL) is gaining ground as a means of producing Class 1 products from laterite resources, and several such projects are under development in Indonesia. But such projects have a history of significant cost overruns and delays and require additional costs for acid production facilities.
There are also concerns about the environmental impact of HPAL, as it often uses coal or oil-fired boilers for heat, emitting up to three times more greenhouse gas emissions than production from coal. sulphide deposits, according to the IEA.
Due to concerns about the environmental impact of the nickel industry in Indonesia, dozens of U.S. and Indonesian environmental organizations in July sent a open letter to Elon Musk and Tesla shareholders, urging them to “end Tesla’s planned investment plan in the nickel industry in Indonesia due to the potentially devastating impacts on the environment and the lives of Indonesians.”
By Tsvetana Paraskova for Oilprice.com
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