Indonesia is looking into forming an OPEC-style cartel for nickel, a key component of EV batteries, to drive inbound investment – but there are reasons to approach this idea with caution, says an academic.
At least in the near-term, the decision to deprive global markets of unprocessed nickel ore achieved its objective of accelerating investment in higher value-added economic activities.
Talk is turning towards building on that success by scaling it up to the level of an OPEC-style cartel. This will allow Indonesia to exercise a greater degree of control over supply and price and maximise economic benefits.It is early days and seems more like a trial balloon than anything, so there are reasons to approach such an idea with caution.
One reason the nickel export bans are working is because they are limited in scope and have a narrow, clearly defined objective - more downstream investment in Indonesian nickel smelters will lead to more investment in battery and EV production.A global cartel of nickel-producing countries would be much more complex, difficult to organise and could be undercut at any time by a single member or simply by the vagaries of the market.
Not every nickel-producing country is going to have - or be able to achieve - the same objective. This could easily make any such undertaking unwieldy. Canada, a major nickel producer, has already indicated that it would be very unlikely to participate in any such scheme.incentivises actors to invest in developing alternative technologies. It would be a big gamble for Indonesia to assume that batteries will always be dependent on nickel.
The downside of alienating partners for short-term economic gain is also worth considering. Though Indonesia has nickel, it cannot manufacture batteries or EVs without the technology and know-how from mature industry players like China’s CATL, South Korea’s LG Group or Japanese automakers. Indonesia needs their assistance to move up the value chain as much as they need Indonesia’s nickel.
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