Indonesia’s Ministry of Energy and Mineral Resources (ESDM) has announced plans to accelerate the downstream processing of nickel towards the development of an electric vehicle (EV) battery ecosystem amidst the risk of a looming steel industry bankruptcy in China.

Julian Ambassadur Shiddiq, Director of Mineral and Coal Program Development at ESDM, stated that the government’s focus is not only on nickel downstreaming to produce stainless steel, which has been a key export product, but also on developing the EV battery ecosystem.

“The government recognizes that the demand for nickel from China’s steel industry is significant, but the EV battery sector is a game changer that could shift market direction,” Julian told Bloomberg Technoz on Thursday, September 26, 2024.

With global policies moving towards decarbonization and the acceleration of the energy transition, Julian noted that the demand for nickel as a key raw material for EV batteries is expected to rise significantly.

In response, the Indonesian government has prepared mitigation strategies by developing new downstream markets and promoting nickel downstreaming through to the end product, including nickel processing for EV batteries.

Julian emphasized that nickel is one of the key components in lithium-ion batteries used in EVs, and the global EV market is predicted to grow rapidly in the coming decades.

“This initiative aims to minimize Indonesia's dependence on China’s steel market and diversify downstream nickel products,” he said.

Going forward, the government will focus on developing supporting industries for battery cell manufacturing, such as anodes, electrolytes, and separators, Julian explained.

It is noteworthy that 84.74% of Indonesia's nickel downstream products, such as nickel pig iron (NPI), ferronickel (Fe-Ni), nickel matte, stainless steel HRC, and ni-scrap, were exported to China in 2023.

This means that should China’s steel demand for Indonesian nickel decline, it could lead to a nickel oversupply and a subsequent drop in global nickel prices, which could negatively impact Indonesia’s nickel industry and reduce export volumes, ultimately affecting the country’s trade balance and state revenue from nickel exports, Julian warned.

As of Wednesday, September 25, 2024, nickel prices had risen by 0.51% to USD 16,796/ton, according to the London Metal Exchange (LME).

The Central Bureau of Statistics (BPS) reported that Indonesia's nickel exports amounted to USD 4.94 billion from January to August 2024, showing an 8.83% year-on-year increase.

Deputy Head of Distribution and Services Statistics at BPS, Pudji Ismartini, highlighted that nickel exports and related products (HS75) grew by 8.83% during the period compared to the same time in 2023.

Meanwhile, ESDM noted that non-tax state revenue (PNBP) from the mineral and coal sector reached IDR 173 trillion, accounting for 58% of total PNBP in the ESDM sector.

China’s steel industry, currently facing bankruptcy risks, is heading towards a wave of consolidation, according to Bloomberg Intelligence (BI). Nearly three-quarters of the country’s steel producers reported losses in the first half of the year, with many potentially facing bankruptcy, BI senior analyst Michelle Leung noted.

The consolidation process is expected to help Beijing concentrate its steel industry, with the goal of having the top five companies control 40% of the market by 2025, and the top 10 companies controlling 60%.