An Indonesian nickel producer has announced plans for a USD 1.8 billion plant as Southeast Asia’s biggest economy tries to boost domestic processing and refining capacity for the material, which is key to electric vehicles.

Indonesia has the world’s largest reserves of nickel, but plays a comparatively small role in the refining process, something the government is trying to change.

PT Merdeka Battery Materials said this week it has signed agreements for the construction of a high-pressure acid leach plant on the island of Sulawesi, which extracts nickel and cobalt from ore.

The project, financed partly by a USD 1.4 billion loan, is expected to take 18 months to complete, with work beginning in January.

The plant will be built in Sulawesi’s Indonesia Morowali Industrial Park, one of Southeast Asia’s biggest nickel production centers.

But China’s growing investment in nickel, a base metal used in electric vehicle batteries and stainless steel, has stoked unrest over pay and working conditions in Chinese-run or funded facilities.

In 2023, hundreds of Indonesian workers protested against conditions at a Chinese-funded nickel processing plant in the same industrial park after an explosion killed 18 people.

Nickel mining has also been linked to deforestation and rights abuses in parts of Indonesia, particularly involving Indigenous communities.

In 2020, Indonesia stopped exports of raw nickel, which led to a boom in domestic nickel processing, drawing large investments from China to build smelters.