A Chinese company is in talks with potential investors to reduce its stake in an Indonesian nickel smelter in order to make its products eligible for U.S. electric vehicle tax credits, an Indonesian official said on July 26.
The U.S. Anti-Inflation Act requires that materials used in electric vehicles (EVs) and batteries must come from companies with 25% or less ownership by “foreign entities of concern,” which includes companies from China, Russia, North Korea and Iran.
Indonesia, the world’s largest nickel producer, is in talks with the United States to secure critical mineral trade to ensure its nickel is included in the supply chain permitted by the Inflation Control Act (IRA). However, the country’s nickel industry is largely controlled by Chinese companies such as Tsingshan Holding Group, Zhejiang Huayou Cobalt, and Legend Resources and Technology. According to Septian Hario Seto, Deputy Coordinating Minister for Maritime Investment, Chinese companies are currently seeking to partner with Indonesian and South Korean companies in both the construction and planning stages of high-pressure acid leaching (HPAL) plants.
High pressure acid leaching (HPAL) is a technique used to produce nickel material from nickel ore, which is essential for electric vehicle batteries. The goal is to reduce Chinese companies’ stake in these projects and qualify for U.S. tax credits, according to Seto, who oversees the mining division at the coordinating ministry. Indonesian companies are also aiming to secure majority stakes in these ventures. In this arrangement, Chinese companies would provide the technology, Indonesian investors would supply the nickel ore, and South Korean investors would handle the off-take agreements.
The Indonesian government and industry are reportedly signing new investment agreements with Chinese companies as minority shareholders. Seto said these efforts are being done on a company-to-company basis without government intervention. Jose Fernandez, a U.S. official who visited Jakarta recently, suggested that critical minerals agreement negotiations between the two countries were progressing positively but did not provide a timeline for completion.
Image source: Mining Technology
