The Future of Nickel Mining in Indonesia
Increasing global demand and Indonesia’s dynamic response
Nickel is an essential element for numerous industrial processes upon which the world relies. First identified as a unique element in 1751 nickel has grown to become an invaluable commodity today. During the current growth period in the global nickel market, it is important to look into the uses for nickel and how demand is impacting price and delivery.
As the Enegra Group has a particular interest in Indonesia we will focus on Indonesia’s market for this important element.
Nickel is undeniably instrumental in global industrial processes. In the United States, the vast majority of primary nickel is consumed in the production of alloys like stainless steel and superalloys. Nickel provides important properties that improve an alloy’s corrosion resistance and its ability to withstand extreme environmental temperatures and stresses.
It is for this reason that nickel alloys are employed in some of the harshest industrial environments such as chemical production, fossil fuel refining, marine installations and even inside jet engines. It is interesting to note that all coins in the United States except for pennies are made of alloys which contain nickel. Beer kegs which are often made from nickel-bearing stainless steel are so robust they can often stay in use for 30–40 years!
One of the most important industrial applications of nickel is in the production of rechargeable lithium-ion batteries for consumer electronics such as laptops, phones and power tools. More importantly, lithium-ion batteries are one of the key components which have spawned the new wave of electric vehicles. The rise of the global electric vehicle industry is set to have a significant impact on nickel mining and refining. It is clear that the use of nickel will continue to grow and this growth can only be sustained through the development of strong, sustainable mining supply chains.
The market for nickel has been known to exhibit extreme highs and lows in the past but the requirement for nickel in the production of lithium-ion batteries has the potential to push prices into new territory. Last year the rise in nickel prices dwarfed the significant rise in gold’s price. The sheer volume of nickel which will be required for the production of electric vehicles will demand strong infrastructure to deliver. The Enegra Group is watching the nickel market closely to identify the opportunities and strengths which are presenting themselves both globally and within Indonesia.
Indonesia has a long history with the mining and production of nickel. Initially, this was centred around small-scale mining during the era of the Dutch East Indies. From these exploratory operations, nickel production expanded rapidly during the 1960s as the Indonesian government became involved in the production and export of the commodity.
The nation of Indonesia is known to have the largest volume of nickel reserves in the world with 23.7% of the globe’s resources. Indonesia also boasts the planet’s greatest annual production quantities of nickel ore above its nearest rival the Philippines. The country’s two primary nickel deposits are located on the islands of Sulawesi and Halmahera. As with many other mineral ores in Indonesia, a significant portion of raw ore nickel was traditionally exported for smelting overseas.
The Indonesian government recently enacted a ban on the export of raw mineral ores which included nickel. This ban was driven by an intention to improve the value-added opportunities for nickel products within the country and a desire to strengthen the local smelter industry. Indonesia has a population of almost a quarter of a billion people and a strong internal market to leverage. As the adoption of electric vehicles grows globally Indonesia intends to capitalise on its nickel resources to create a regional hub for the production of the next generation of electric vehicles.
China is Indonesia’s largest customer for nickel exports and in response to the ban on exporting nickel ore Chinese producers of stainless steel began increasing their nickel inventories. This stockpiling created a significant impact on the price of nickel driving it up over 60% during 2019, bringing prices to their highest levels since 2014. Although more than half of Indonesia’s nickel ore is smelted within the country the export ban is expected to impact approximately 10% of the global nickel supply.
To hedge against the export ban Chinese manufacturers have instigated an aggressive wave of investment into local operations. Increased investment in mining and smelting of nickel will help to improve Indonesia’s infrastructure for this valuable commodity. Further value to the industry will be delivered through investment into state of the art battery production facilities. This growth will be vital to facilitate Indonesia’s intended boom in electric vehicle production.
As the world demand’s for nickel increase Indonesia is set to play a pivotal role in supplying this valuable commodity. Beyond raw nickel, Indonesia will provide value-added products that will leverage on their raw mineral deposits and assist in the growth of new and vibrant industries backed by nickel. The Enegra Group intends to play a part in delivering a sustainable and valuable industry for the people of Indonesia. This will be an interesting space to watch and participate in.
Enegra Group Ltd (LL15959) is a commodity trading company focused on resources in Southeast Asia. Equity in Enegra has been tokenised via the EGX security token. For enquires related to the purchase of EGX please contact support@enegragroup.com.
