Nickel EV battery supply chain: US senators skeptical of top producer Indonesia joining IRA
“Eligibility for the critical minerals credit must prioritize domestic producers.”
On Wednesday, US senators sent a bipartisan letter to the US departments of Treasury, Trade and Energy expressing “several concerns” regarding a potential critical mineral free trade agreement between the US and Indonesia:
“Minerals and metals from Indonesia currently enjoy full access to the US market, as well as most favored nation tariff status. Indonesian-sourced minerals are fully available to automakers, battery manufacturers, or other energy manufacturers in the US. However, given the extraordinary taxpayer resources at play, we strongly believe that eligibility for the critical minerals credit must prioritize domestic producers and existing free trade agreement partners.”
“If expansion is deemed necessary, it should be directed toward countries with strong labor, human rights and environmental standards. We urge the Administration to include these concerns in its considerations of any expanded access for critical minerals.”
The fierce opposition from US politicians will be a blow to Indonesian President Joko Widodo who has taken personal interest in negotiating a free trade deal with the US to benefit from the $430 billion US Inflation Reduction Act. US President Joe Biden will host Jokowi, as he is widely known, at the White House in November.
Under the IRA, a certain percentage of battery metals going into EVs must be sourced locally or from countries with which the US has free trade accords in place. For Indonesia, becoming a full-fledged participant in the IRA would be a massive shot in the arm for its mining and refining industry – specifically nickel.
Indonesia is already responsible for half of global nickel production and output will only ramp up over the next several years. Widodo met with Elon Musk last year after the Tesla boss expressed concerns about the availability of nickel amid the rapid expansion of the EV industry globally.
Record battery nickel demand a 2023 certainty
Over the first eight months of 2023, 174,750 tonnes of nickel were deployed in the batteries of newly-sold EVs around the world with nearly a fifth of the total finding their way into the batteries of just two models – Tesla’s Model Y and Model 3 – according to the Adamas Intelligence EV Battery Capacity and Battery Metals Tracker.
The nickel deployed from January through August this year already constitutes 84% of nickel deployed in all of 2022 and 45% more than the same period of that year.
Apart from booming EV registrations around the globe, nickel demand is also being boosted by a trend towards batteries with high nickel content in order to boost energy density, driving range and charging times.
Contrary to conventional wisdom, the use of high-nickel cathode chemistries is not confined to performance and long-range vehicles only, it’s increasingly popular with automakers across vehicle segments and geographies.
While early nickel-cobalt-manganese (NCM) cells used the metals in a roughly 1:1:1 ratio, the most widely used NCM cathode in 2023 to-date has a roughly 8:1:1 split, Adamas data shows. Nickel-cobalt-aluminum (NCA) batteries, used primarily by Tesla, also sport nickel content above 80%.
Rising demand for nickel from battery makers comes despite the ascendance of no-nickel cathode chemistries such as lithium-iron-phosphate or LFP.
LFP has captured 23% of the global passenger EV market by GWh deployed so far this year, up from 22% in 2022 and only 14% in 2021. This comes on the back of strong adoption in China where the market share for LFP is now more than 50%.
Adamas take:
While nickel sulfate prices in China’s battery supply chain are officially in a bear market, dropping by more than 20% year to date, the rise in nickel tonnes used in batteries (boosted by continued adoption of high-nickel batteries) will add support.
Once the Chinese stainless steel industry – still the top source of demand for nickel – recovers, the scramble for nickel will continue – with or without Indonesia in the IRA.
Image Source: Indonesian President Joko Widodo and Tesla’s CEO Elon Musk meet May 2022. (Image by Joko Widodo, Twitter).
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