According to THE DIPLOMAT on September 6, 2024, Indonesia has the world’s largest nickel ore reserves, mainly located in or near Sulawesi.
For a long time, unprocessed ore has been mined in Indonesia and exported to other countries for refining and used to produce stainless steel.
But in the past few years, nickel has gained new currency as a commodity and a bargaining chip for Indonesia’s industrialization efforts.
The transition from fossil fuels to clean energy will require a lot of batteries. Lithium-ion batteries are one of the most commonly used types of batteries, and nickel is required as a key input in their manufacturing process. As the global clean energy transition accelerates, nickel demand is expected to rise.
As part of its efforts to encourage downstream industrialization, Indonesia banned the export of unprocessed nickel ore a few years ago. The move was intended to force companies to refine ore in Indonesia and increase investment in domestic smelters.
If judged by this ambition alone, it has been quite successful. Since the export ban was enacted, billions of dollars have poured into nickel smelters and related industrial parks in Indonesia. We know this works because refined nickel exports have surged in recent years to the point where a global glut has driven some foreign nickel miners into bankruptcy.
stainless-steel-coil-sheet- Factory – Warehouse_0011
Why is this Happening?
Exporting unprocessed ore means that much of the value added at the processing stage is not captured by Indonesia. Processing nickel domestically means that more of the value created stays in Indonesia. To ensure that Indonesian companies (and not just foreign companies operating in Indonesia) participate in this value creation, the Indonesian government has been looking to expand its influence in the sector.
Antam is an Indonesian mining company with interests in gold and nickel. The company is 65% owned by the state through a holding company called MIND ID. This holding company was established to coordinate the management of state-owned mining assets to better serve the country’s national and strategic interests.
Unsurprisingly, the nickel ore ban has been good for Antam’s business.
In 2018, before the ban, Antam had revenues of about $1.6 billion (at a fixed exchange rate of 16,000 rupees to the dollar), of which 43% came from exports.
By 2023, revenues have grown to $2.6 billion, of which only 14% came from exports. Nickel ore has become an increasingly important part of Antam’s business, with the miner producing 13.5 million wet tonnes of nickel ore last year, up from 1.7 million wet tonnes in 2019.
Antam is producing far more nickel ore than it did a few years ago, and almost all of it is being absorbed domestically. This suggests that the export ban is achieving one of its main objectives. But the long-term goal was never to be limited to nickel ore, but to move into more valuable parts of the nickel supply chain, including smelting and related industrial activities. We are seeing this process start to play out now.
While the export ban has accelerated investment in nickel smelters, many of these are majority-owned by foreign companies, especially Chinese.
It appears that Antam is eyeing a larger role in this value chain, which provided helpful context for CEO Nicolas Kanter’s announcement last month that the state-owned miner would acquire a smelter from China’s Tsingshan Holding Group, which has been a major investor in Indonesia’s downstream nickel sector. In a separate deal, Antam is developing two additional nickel processing facilities with China’s Ningbo Puqin Times Co Ltd.
Antam currently produces ferronickel, an alloy used to make stainless steel, but has been hampered by capacity constraints. Its ferronickel smelters have been operating at or near 100% capacity for the past few years, meaning its existing facilities are unable to produce enough refined nickel to meet current demand.
In Conclusion
These recent announcements suggest that Antam is looking to continue to move up and expand its share of the nickel value chain through co-development and acquisition of additional processing capacity. The likely end goal is not only to produce more ferronickel but also to start producing more refined battery-grade nickel.
Indonesia’s export ban has triggered a huge investment boom in the domestic nickel value chain, with billions of dollars flowing into smelters and industrial parks.
Now, Antam is looking to insert itself into increasingly strategic and valuable links in that chain to gain greater control over the production of refined nickel products such as ferronickel and nickel matte.
It is too early to say whether Indonesia’s nickel strategy will achieve all of its goals, but Antam’s acquisition and development of additional smelter capacity is a key part of this long-term vision.