US and Indonesia to discuss potential for deal on electric vehicle minerals

The United States and Indonesia on Monday will discuss how to advance a potential minerals partnership aimed at stimulating trade of the electric vehicle (EV) battery metal nickel, according to three people with direct knowledge of the conversations.

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“There’s a lot of work to do before we are able to formally announce negotiations on a critical minerals partnership,” the person said.

The Biden administration is also discussing ways to carve out any nickel that is extracted from Indonesia but processed in China from receiving the IRA credits, one of the sources added.

The White House did not respond to a request for comment.

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Indonesia, which has the world’s biggest nickel ore reserves, in September asked the United States to begin discussions for a trade deal for critical minerals so that exports from the Southeast Asian country can be covered under the US Inflation Reduction Act (IRA).

The Biden administration discussions, which include US trade chief Katherine Tai as well as the White House, focus on making sure that any potential nickel supply be produced with as little environmental impact as possible, according to one of the sources, who directly advised the administration and was not authorised to speak publicly.

“The overall momentum is promising, but (we) don’t want to minimise the fact that there is a fair amount of work to be done here,” one of the people said.

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Indonesia’s nickel supplies are the world’s largest and nickel mining there has been blamed for heavy deforestation and water pollution.

Under guidelines for the US law issued in March, Washington has required that a certain amount of critical minerals in EV batteries be produced or assembled in North America or a free trade partner, for EVs sold in the United States to be eligible for tax credits. Indonesia does not have a free-trade agreement with the United States.

One estimate puts the global market value for the nickel industry at US$33.5 billion in 2022, though the market is oversupplied.

The only US nickel mine is set to close in a few years, and the country has no nickel smelter, a risk to Biden’s goal for the United States to lead in EV manufacturing.

The government last year gave nearly US$115 million to Talon Metals, to partially fund a nickel processing plant in North Dakota that will supply Tesla.

Talon is seeking permits for its proposed Minnesota nickel mine, but has faced opposition from Indigenous people. Many US miners have said that the Biden administration should focus more on approving domestic projects than seeking international supply.