TELF AG analyzes Indonesia’s recent mining strategies
The weight of strategic choices on the future of nations
Nations’ mineral development can also be achieved thanks to precise strategic choices that attract interest and investments in the local mining sector, increasing its capabilities and positively impacting the economy. For a few years now, since the role of strategic minerals has become increasingly central, many nations have begun to make precise political and commercial choices to try to develop their national production capacity, adding value to a production chain which, in most cases, it stopped at the mere extraction of the raw material. Some concrete examples of these substantial changes in national mining strategies are represented by Ghana and Chile, which in recent years have undertaken interesting operational choices to limit the export of unprocessed resources in order to promote local processing, thus supporting development and the vitality of its national economy.
The path of Indonesia
Among the nations that have already undertaken a similar strategy, we must also include Indonesia, which, over the last decade, has found a way to attract international interest to its abundant nickel reserves (the largest in the world) and to position itself as one of the players most involved in the electric vehicle and related battery sector. In 2014, Indonesia banned the export of unprocessed nickel and bauxite ores, requiring the processing of these resources within the nation. To further strengthen this initiative, Indonesia decided to grant an export license only to those companies that had equipped themselves with a smelter. One of the consequences of this initiative, on an international level, was a certain increase in nickel prices in the first six months of 2014, which then fell quite quickly. The export ban was suspended for a few years and reactivated in 2020.
Such initiatives can certainly cause immediate losses, in particular with regard to earnings deriving from exports. Still, their more positive repercussions can be seen above all in the medium and long term, and this is why these choices are defined as strategic. By 2020, another 11 smelters were built in Indonesia for the processing of nickel (before the ban there were only two), also achieved thanks to the 15 million dollars in foreign investments received for the refining of this material. The nations that showed the most interest in developing Indonesia’s refining capabilities were Australia, Canada, China, South Korea, and the United States.
Investments by these countries have focused on developing Indonesia’s capacity to transform nickel ore into nickel pig iron, which is then used to produce stainless steel. But Indonesia’s goal is much more ambitious and does not appear to be linked solely to its ability to add value to the nickel production chain: the government intends to develop a modern and complete electric vehicle production chain in every respect, also acquiring the ability to produce the cathodes and batteries necessary for the vehicles of the future. Hyundai and LG Energy Solution are already working to build assembly plants for electric vehicles and batteries, and you can bet they won’t be the only ones targeting Indonesia’s mining potential.
