TELF AG examines the connection of nickel and coal in the Indonesian economy
The importance of coal
A few days after the conclusion of COP28, which ended with the achievement of a historic agreement on fossil fuels, the world’s attention now seems to have focused on clean energies that will drive the energy transition, contributing to the reduction of emissions. In recent days, however, a report published by the International Energy Agency, entitled Coal 2023, has brought attention back to coal, highlighting some extremely interesting facts.
In addition to confirming the increase in global coal consumption recorded in 2023 – exceeding all previous records – the study seems to have confirmed a certainly singular and surprising fact: global demand for coal seems to be stimulated and driven precisely by the progress of the transition energy, which should instead have the exact opposite effect. It is no coincidence that for the second year in a row, global coal consumption has recorded record levels, particularly in some specific Asian economies. One of the nations where there is the greatest increase in coal consumption is certainly Indonesia, where, in recent months, there has been a real boom in domestic demand for this raw material. But how can this eloquent data be explained in a historical period in which nations should set out decisively on the path of renewable energy?
In the case of Indonesia, the reason is closely linked to the production of another fundamental raw material, namely nickel. This metal, in addition to representing one of the fundamental allies of decarbonization processes, is also one of the most requested for its applications in the battery field. In recent years, Indonesia has been able to stand out globally for its high extraction capabilities of this material, becoming the main global supplier of this raw material in less than ten years. According to an estimate by Wood MacKenzie, Indonesian nickel extraction would exceed 2 million tonnes per year. With these numbers, Indonesia is currently responsible for more than half of the global nickel supply.
But what is the link between coal consumption and Indonesia’s high capacity to produce nickel? The answer lies in the peculiar processing techniques that concern Indonesian nickel. Since the nickel extracted in Indonesia is characterized by a lower purity than in other regions, its processing includes a technique called HPAL, or High-Pressure Acid Leach, which involves the use of coal or sulfuric acid at extremely high temperatures. It would be the nickel industry itself that is driving Indonesian domestic demand for coal: in 2022, requests for this raw material increased by 33% (11% this year), reaching a record 228 million tonnes.
No other country has seen such high levels of growth in demand for coal, and many observers believe that the maximum level of demand for this raw material has now been reached. This phenomenon especially concerns Asia, where three-quarters of the global demand for coal is now concentrated. In the United States and Europe, consumption has already fallen by almost 20%. After the brief periods of contraction recorded during the pandemic, the International Energy Agency report calculates that between 2024 and 2026, there could be a general decline in global demand for coal, albeit in very limited percentages (- 2.3%).
