Indonesia is considering ways to scale back China’s role in the country’s nickel production by limiting Chinese companies to minority shareholder status. Fifty-seven per cent of the world’s refined nickel, a key ingredient in electric vehicle (EV) batteries, comes from Indonesia, about 80 per cent of which is produced by companies in which Chinese firms have a majority ownership.
While Chinese investment was once a boon to Indonesia’s EV ambitions, it may now be a complicating factor. Jakarta is hoping to qualify for U.S. tax credits under the latter’s Inflation Reduction Act (IRA), which is directing nearly US$400 billion in U.S. federal funding to clean energy projects.
Eligibility for those tax credits, however, requires effectively boxing out “foreign entities of concern” — in this case, China. Thus far, the Indonesian government has not imposed mandatory limits on Chinese ownership but recent reporting suggests that some Chinese firms are considering reducing their ownership stakes in Indonesian nickel operations to less than 25 per cent to try to ensure that their products are IRA-compliant.
Ottawa and Canadian mining interests will be closely watching Indonesia’s next moves. In April, Deputy Prime Minister Chrystia Freeland said Canada was “very actively working” with “democratic partners” on a joint response to what they characterize as market manipulation by Indonesian and Chinese nickel producers. The two Asian countries are accused of flooding the market with low-priced nickel, causing prices to plummet and putting producers in countries such as Canada and Australia in jeopardy.
