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The head of French miner Eramet’s Indonesian operations has said it has become impossible for western companies to run profitable nickel operations without partnering with their Chinese counterparts, amid a slump in prices for a metal critical to electric vehicle batteries.
In a Financial Times interview Jérôme Baudelet, chief executive of Eramet Indonesia, said Chinese technology, expertise and equipment were essential to produce nickel at competitive prices.
“I don’t think you can do without [Chinese companies],” he said. “The risk is not being competitive and to have a much higher capex. So you have to be pragmatic.”
Eramet is one of a handful of western companies in the nickel industry in Indonesia — the world’s biggest producer of the silvery-white metal essential for stainless steel as well as EV batteries. It operates the Weda Bay mine in Indonesia with its partner, the Chinese nickel company Tsingshan Holding Group.
Earlier this year, Eramet and Germany’s BASF cancelled plans for the joint development of a $2.6bn nickel-cobalt refinery complex in Weda Bay, saying there were adequate supplies of battery-grade nickel in the market. The project was set to be the only nickel plant in Indonesia with 100 per cent western ownership.
Baudelet said the Eramet-BASF project no longer made economic sense due to “difficulties” in the market. Nickel prices have been depressed for two years due to slowing demand growth and Indonesian supplies continuing to increase.
Eramet remains open to nickel processing opportunities with a partner but the project would have to be associated with mining, he said.
“You can actually be profitable as a western company if you have the plant built by a Chinese [company], and maybe get the operations done in that particular plant by the Chinese, because they have built a lot of expertise,” said Baudelet.
He added that Chinese companies’ high-pressure acid leach (HPAL) technology — extracting battery-grade nickel from low-quality ore — was essential for building nickel processing plants. “They also have economies of scale in all the equipment they build for those plants,” he said.
Over the past two decades, HPAL projects by western companies in New Caledonia, Australia and elsewhere have failed due to high costs and technical issues. But new Chinese technology has enabled such plants to be built quickly and in a more cost-efficient way.
Chinese companies dominate nickel processing in Indonesia, which has the world’s largest nickel reserves. They invested billions of dollars in south-east Asia’s largest economy after Jakarta banned nickel ore exports in 2020 — a move that forced foreign companies to set up refineries onshore.
Western companies are far fewer. Last year US carmaker Ford partnered with Vale Indonesia and China’s Huayou Cobalt to build a nickel smelter. The FT reported earlier this year that Stellantis was in talks with Huayou for another smelter.
Indonesia now accounts for 57 per cent of global refined nickel production, and its share is forecast to rise to 69 per cent by the end of the decade, according to Benchmark Mineral Intelligence.
The decline in prices and Indonesia pressing ahead with nickel production has triggered mine closures in other countries.
Baudelet said Eramet would focus on opportunities primarily in mining and exploration as part of its expansion plans in Indonesia. “All that capacity installed in Indonesia will require additional ore in the coming years, and we believe there’s a need for more exploration,” he explained.
Baudelet also said the US was making a mistake by not signing a critical minerals agreement with Jakarta to make Indonesian nickel eligible for incentives under the Inflation Reduction Act. President Joe Biden’s IRA seeks to curb Beijing’s influence in the EV supply chain — though its fate remains uncertain under a Donald Trump presidency.
Currently, most Indonesian nickel does not benefit from the IRA due to the dominant presence of Chinese companies, but the country has been taking steps to qualify.
“When you have a country that will soon be producing 70 per cent of the world’s nickel . . . and if you just don’t qualify them as a potential supplier, you somehow shoot yourself a little bit in the foot,” Baudelet said. “That’s the most competitive nickel on the planet.”
