Between Hopes and Problems
Investment in electric vehicle is spreading to mining business. Industry players are waiting for a policy to uphold the principles of fairness and sustainability.
NEWS reports on electric vehicles prompted Nafielah Mahmudah to buy up shares of Aneka Tambang ahead of the close of trading in December. “So far, I plan to hold on to them until Tesla goes in,” said the 30 year-old photographer, in Jakarta, Saturday, January 9.
For the past month, the buzz surrounding electric vehicle was almost comparable in intensity of news coverage on the increasing number of Covid-19 cases and vaccination plan by the government. After accelerating its realization since a year before, the government launched the battery-based electric vehicle program on December 17, 2020.
A new report came from the mass media in South Korea just a day later. LG Energy Solution, subsidiary of LG Group, is said to have signed a memorandum of understanding on an investment valued at US$9.8 billion or around Rp142 trillion for the construction of electric vehicle battery cell factory in Indonesia.
Although the Investment Coordinating Board (BKPM) only officially announced it on Wednesday, December 30, information about the jumbo investment plan proved to be enough of a catalyst for the trade in the Indonesia Stock Exchange. Moreover, the project will also involve MIND ID—a new trademark by Indonesia Asahan Aluminium or Inalum, the parent company of state-owned mining companies, including Aneka Tambang. The youngest son of President Joko Widodo further added fuel by tweeting “Hmmm $ANTM.”
Like Nafielah, investors were suddenly buying into the shares of the company known for its mining portfolio and nickel—a material in electric vehicle battery—purification facility. Coincidentally, around the same time these days toward of the year of the Metal Ox in the Chinese calendar, the price of nickel in London Metal Exchange futures market is rising. The long rally of Aneka Tambang and two other members of MIND ID, Timah (TINS) and Vale Indonesia (INCO) continued until last week. As of Friday, January 8, ANTM dominated the transactions of shares for the week with a trading value of as high as Rp13.88 trillion.
THE government is determined to turn Indonesia into a major player in the world’s electric vehicle industry. Aside from partnering with automotive manufacturers to build vehicle production facilities, the government also offers potential investment in lithium battery development.
Before LG Group, Contemporary Amperex Technology Co Ltd (CATL) from China had signed the principal agreement on the lithium battery industry supply chain cooperation project with Antam in November 2020. The investment value is stated at US$5.1 billion and construction is scheduled to start this year.
With the world’s largest nickel reserve of 21 million tons, Indonesia is strongly positioned to provide raw materials for production of the battery, which is the primary component of electric cars. In 2019, the country also became the largest producer of nickel ore in the world with 800,000 tons. To fulfill the needs of electric vehicles and the downstream project of mines, the government prohibits export of raw nickel ore.
The enormous potential of electric vehicle battery development turns nickel mining into a prime candidate of promising business in the future. For ANTM, whose portfolio includes 353.74 million wet metric tons (WMT) of nickel ore reserve with 1.36 WMTs in resources, this presents a huge opportunity for the donwstream project of their mines. “Potential nickel mineral reserve and resource will be one of the driving forces of the company’s business scale development through downstreaming project of the nickel mineral,” said Aneka Tambang Senior Vice President Corporate Secretary Kunto Hendrapawoko on Friday, January 8.
According to Kunto, the company will continue its expansion this year. The plan includes establishing partnerships for the development of new processed products in downstream projects, on both national and international scale. “Especially with work partners who have access to technology, market access capability, and funding to develop new processed mineral production from reserves owned by the company,” said Kunto. So far, since the export policy for low-grade nickel ore ended in 2019, Antam has been focusing its nickel production to feed the ferronickel factory in Southeast Sulawesi.
The Energy and Mineral Resources Ministry explained that there are six ongoing nickel smelter construction projects currently underway in Morowali Industrial park, Central Sulawesi. Utilizing high pressure acid leaching (HPAL) technology, the six projects are carried out by Halmahera Persada Legend, Adhikara Cipta Mulia, Smelter Nikel Indonesia, Vale Indonesia, Huayue Nickel Cobalt, and QMB New Energy Materials.
Energy Ministry Mineral Business Development Director Yunus Saefulhak said that the construction of HPAL smelters requires cooperation with foreign investors. From economic perspective, the HPAL industry is categorized as marginal with limited number of technology owners.
Yunus assures that the government’s plan of providing convenience for the electric vehicle industry, through either fiscal or non-fiscal facilities, will also reach the upstream mining processing sector. “The government, under coordination by Coordinating Ministry for Maritime Affairs and Investment, is preparing regulations to create a supportive ecosystem from upstream to downstream,” said Yunus on January 8.
INVESTMENT in electric cars, particularly in the development of battery components, brings fresh air not only to state owned mining companies. Private nickel mining companies joined in the Indonesian Nickel Miners Association (APNI) are also preparing to seize this big opportunity.
APNI Secretary-General Meidy Katrin Lengkey said that the electric battery industry will go on if the raw material supply chain is running smoothly. This means the downstream project of mining products must be kept alive as well. Miners, as she explained, will always see a bright prospect as long as the downstream industry remains functioning.
However, before venturing too far, Meidy reminds the government to address some issues in the downstream industry sector. She urges the government to be firm in implementing the Energy and Mineral Resources Ministry Regulation No. 11/2020 on the procedure for determining benchmark prices for metal minerals and coals. Among others, this regulation oversees the commerce and price of domestic nickel.
According to her, there are still transactions between miners and smelters who do not follow the mineral benchmark price. “We only ask for fairness, whether the smelters are willing to accept the price as stated, and the government to oversee the transaction closely,” said Meidy on January 8.
On the other side, Indonesia Morowali Industrial Park Chief Executive Officer Alexander Barus said the government needs to issue derivatives of the Presidential Regulation No. 55/2019 on the acceleration of battery-based electric motor vehicle program. Therefore, the battery electric vehicle program may ensure the business continuity of all industry players. “We need sufficient conditions to shape culture, infrastructure habits, so that the domestic industry may flourish,” said Alexander on January 7.
He mentioned the sustainability principle in nickel management as an example. Alexander said that the amount of nickel extracted every year needs to be optimized, so that the large potential is not only utilized to serve short-term business interests, but also considers the needs of future generations.
The same goes for the guarantee of environmentally-friendly downstream mining activities. There have been numerous questions regarding the waste from the HPAL. There are also concerns about waste from lithium batteries with their limited life. The stipulation of tailing adequacy requirement should be able to prevent environmental damage.
According to Alexander, the lack of derivative regulations addressing such issues had proven to be an obstacle in the construction of four nickel cobalt cathode factories and one lithium battery recycling plant in Morowali. Investment value for the five projects amounted to US$3 billion. “In order to become a major player, we must be able to do our homework well. The ball is now in the government’s court,” he said.
Energy Ministry Mineral Business Development Director Yunus Saefulhak said the government is currently evaluating regulatory formulation that would be in line with international standards. “The battery industry that will be established in Indonesia is expected to meet international standards, particularly in clean energy.”