Indonesia's EV Dream Crashing On A Lack Of Lithium

(MENAFN- Asia Times) JAKARTA – Delivering a speech on the sidelines of last year's G20 Summit, President Joko Widodo pointed to lithium as the one crucial element Indonesia still needed to make electric vehicle (EV) batteries. Turning, he gestured towards Australian Prime Minister
Anthony Albanese seated near him and observed:“That man has lithium.”

Nickel-rich Indonesia may be on the cusp of an EV battery revolution, but it still lacks a guaranteed supply
of lithium for it to become a reality by 2025, the year Maritime Affairs and Investment Coordinating Minister
Luhut Panjaitan has targeted for the first battery plant
to go into operation.

“Australia is the best candidate to develop the EV battery industry
because half of the world's lithium is found in the country of the kangaroo,” Panjaitan told the Australia Indonesia Business Council in Perth last February as Indonesia began its search for a supplier.

According to a well-placed government
source, however, the pioneering US$1.1 billion plant
, a joint venture between South Korea's LG Energy Solution, LG Chemical, POSCO, Huayou Holding and the state-owned Indonesia Battery Corp (IBC) known as HKML, is already facing major headwinds.

While a shortage of lithium appears to be the major impediment in the longer term, sources close to the HKML consortium blame much of the current delay on inevitable“regulatory issues” that have arisen since the project broke ground in Karawang, east of Jakarta, in September 2021.

Land acquisition problems in the fast-growing industrial suburb were partly responsible for a two-year delay to the Chinese-funded Jakarta-Bandung fast-rail enterprise, which saw costs balloon from $6 billion to $8 billion and leave the government
scrambling to find the balance.

Karawang is also the site of the Lippo Group's $20 billion Meikarta mega-project, which has been stalled for years over allegations of corruption
involving company executives and Bekasi Regency officials.

Advertised as a“city of the future,” Meikarta's planned 92 tower blocks cover 500 hectares, adjoining the new Kertajati international airport, the Trans-Jakarta Expressway and the new rail link, which finally becomes operational in August.

Investment Minister
Bahlil Lahadalia reportedly flew to South Korea recently in a bid to shore up the Korean venture that Widodo has said underscores his commitment to downstream processing and“escaping as soon as possible from the trap of raw material exports.”


Investment Minister
Bahlil Lahadalia makes a point. Image: Twitter

Lahadalia may be regretting his comment at the time of the ground-breaking:“They (the South Korean firms) only need to bring in the capital and technology
and make the market
, while the government
is taking care of permits and incentives in line with the president's directives.”

Nothing has been said publicly about the delay, but the venture into EV battery making is a step up in added value from the previous focus on manufacturing
stainless steel from class two nickel deposits in the three processing centers in Sulawesi and Maluku.

Indeed, HKML's Karawang plant
is part of a planned $9.8 billion integrated supply
chain&sa=Search#1141" style="color:blue"> supply
for lithium-ion battery production, from nickel mining
to smelting, refining, precursor and cathode manufacturing

Although the LG operation may have come to a halt for now, top Korean steel maker POSCO is proceeding with a $441 million nickel smelter at the Weda Bay, Maluku, Industrial Park to produce an annual 47,000 tonnes of nickel intermediates for one million electric vehicles.

POSCO and Ningbo Liqin, China's largest nickel resources trader, are also embarking on a separate facility in South Sulawesi, which will eventually produce 115,000 tonnes of mixed nickel-cobalt hydroxide precipitate (MHP) a year, enough for 1.2 million battery packs.

MHP is the main feedstock in the production of nickel sulfate, a high-speed acid-leach (HPAL) process crucial to manufacturing
lithium-ion batteries that use nickel-rich cathodes.

Last year, in a trend Indonesia may be compelled to follow, POSCO announced plans to invest $4 billion in a new lithium mine in Argentina; in 2021, it also bought a 30% stake in West Australia's Ravensthorpe nickel operation.

With Indonesia needing an annual 70,000 tonnes of lithium hydroxide to produce cathode material, IBC has raised the possibility of state mining
holding company MIND-ID buying into an Australian lithium mine to ensure a long-term supply

“The (LG) deal was made with a lack of forward thinking,” says one analyst, pointing to a sharp increase in worldwide lithium consumption from 86,100 tonnes to 121,500 tonnes in 2022.“Demand has strengthened, and Indonesia is at the back of the queue.”

The International Energy Agency predicts worldwide shortages by 2025 and a recent Credit Suisse report figures that demand could treble over the next two years, with the US looking for alternative suppliers to reduce its dependence on China.


Work is under way at the Xinwangda Electric Vehicle Battery Co in Nanjing, which makes lithium batteries for electric cars and other uses. Photo: AFP

In a departure from a historic trading trend, particularly in coal
and iron ore, home-grown lithium companies are looking to refine the metal in Australia, which would make the export market
even tighter despite a spate of new global discoveries.

Australia's Association of Mining and Exploration Companies recently warned that a failure to look beyond its key advantage as a rich source of lithium – and the opportunities further down the supply
chain&sa=Search#1141" style="color:blue"> supply
– could cost the nation dearly.

According to the most recent US Geological Survey data, Australia has lithium reserves of 3.8 million tonnes, second only to Chile (9.3MT) and ahead of Argentina (2.7MT), China (2 MT) and the US (1MT). Total world reserves are put at 26MT.

Australia is currently the world's largest lithium producer, with last year's output totaling 61,000 tonnes, or nearly half of global production as trade in all EV battery ingredients – and their price – ramped up exponentially.

About 96% of Australia's lithium exports last year went to China, which accounts for 58% of global lithium processing capacity and nearly 80% of global lithium battery manufacturing
capacity – a dominance that worries US strategists.

Chinese firms are partners in two of Australia's largest mines, including Greenbushes, the world's premier hard-rock lithium deposit south of Perth, which Sichuan's Tianqi Lithium partly owns with North Carolina-based Albemarle and two Australian companies.

Indonesia's problem lies in the fact that Greenbushes and West Australia's three other top producers are already committed. Only diversified conglomerate Wesfarmers, a retail giant making its first entry into mining
, may offer hope of a long-term contract.

But its Mount Holland mine, lying 445 kilometers east of Perth, has also run into obstacles caused by inflation, rising costs and labor
shortages – a common story in Australia's lithium mining
and processing sector.

According to recent company statements, it won't be until 2026 that the mine begins producing 45,000 tonnes of battery-grade lithium hydroxide through a
Tianqi-run refinery
at Kwinana, near Perth.

The mine contains an estimated 94.2 million tonnes of proven and probable reserves and is now not expected to be producing an annual 50,000 tonnes of lithium hydroxide from a Tianqi-run refinery
at Kwinana, near Perth, until 2026.


Trucks rumbling along at the Mount Holland lithium mine. Image: Twitter

Industry sources say the Indonesians have already had initial discussions with Wesfarmers and Chilean partner Sociedad Quimica y Minera (SQM). It may also be looking to Liontown's Kathleen project and Core Lithium's Mt Finnis venture near Darwin, in the Northern Territory, as other potential suppliers.

“Australia and Indonesia are logical partners,” says Jennifer Matthews, a former diplomat
and now national president of the Australia-Indonesia Business Council.“It would be really good for the benefit of both our countries.”

“But the challenge for Indonesia is to find potential suppliers because it has become such a competitive space,” she told Asia Times.“Lithium is a hotly sought-after mineral, so it depends on whether they can come up with the right sort of deal.”

Indonesia wants to produce three million lithium batteries a year by 2030; each will require about 8 kilograms of lithium, which translates into 240,000 tonnes of lithium hydroxide a year for two million electric cars and 13 million electric motorcycles.

Yet Bureau of Statistics figures show Indonesia's lithium oxide and hydroxide imports in 2022, mostly from Chile and China, amounted to only 138 tonnes, less than in 2021 and only slightly more than in 2019 and 2020.

Panjaitan told the Australians that Indonesia's“dream” of becoming the world's EV battery king depends on partners“who trust and support each other and offer better regulations and more open investment

“We're on our way to making a major transformation,” he said.“Even though many countries still underestimate us, not a few appreciate Indonesia's big change because it has been able to survive global economic turmoil.”

The minister announced recently that Indonesia has proposed a limited free trade agreement (FTA) with Washington so that local companies in the EV battery supply
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can benefit from tax credits in shipping
nickel products to the US.

It would be similar to a fast-tracked US trade deal with Japan last March covering EV battery minerals, including lithium, nickel, manganese and cobalt – all part of US efforts to reduce its dependence on China for key components.

Under the 2022 Inflation Reduction Act, new guidelines for EV tax credits require a certain value of battery components to be manufactured or assembled in the US or by a free trade partner.


President Joko Widodo (third left) during a visit to the PT Obsidian Stainless Steel (OSS) production line, during a series of events for the inauguration of the China-invested nickel smelter factory PT Gunbuster Nickel Industry (GNI) in Konawe, Southeast Sulawesi, in a file photo. Image: Twitter / Doc Palace / Agus Suparto

Indonesia has been trying to use its vast nickel reserves in eastern Indonesia to attract investment
from international battery and EV manufacturers since the ban on ore exports, the forerunner to looming bans on bauxite and copper concentrate.

Panjaitan has so far been unable to entice EV-maker Tesla, but earlier this month Ford signed a final investment
deal with Brazil-owned PT Vale Indonesia Tbk and China's Zhejiang Huayou Cobalt to build a $4.5 billion HPAL smelter in Morawali, Central Sulawesi.

Producing 109,000 tonnes of hydroxide precipitate a year for a series of EV battery plant
s, it is Ford's first investment
in the Indonesian mining
sector and forms part of its global grand plan to manufacture two million EVs by 2026.

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