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CNN Business
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Indonesia produces more nickel than any other country. As demand skyrockets for batteries to power energy conversionpresents a huge opportunity and the archipelago nation of 276 million people intends to capitalize on it.
with electric car revolution driving demand for key battery metals such as nickel, Indonesia has start lobbying for the creation of an OPEC-like group – but instead of managing oil exports, it would unite the top producers, allowing them to adjust their policies.
The bid looks like a long shot. Canada, another leading producer, has said that it will “very unlikely” participation. The nickel market also has a very different structure than the crude oil market, with private companies rather than National companies run the program.
“I don’t believe it would be suitable for a manufacturing corporation,” said Richard Bronze, an analyst at Energy Aspects, a research firm.
But Indonesia’s campaign is an indication of how the clean energy transition can reshape geopolitics, as countries with valuable reserves of nickel, cobalt and lithium seek to capitalize on access to items in need.
“This is how they think they can be better aligned with the global and local energy markets,” said Jane Nakano, a senior fellow focusing on energy security and climate change at the Center for Strategic politics, and at the same time being part of this emerging energy economy.” and International Studies.
In the 62 years since its founding, the Organization of the Petroleum Exporting Countries, commonly known as OPEC, has at times played an important role in shaping the global oil market, most notably when the Arab members of this organization prohibit exports to the United States and other countries. about their support for Israel in 1973. It angered the White House in October over its decision to cut production, a policy it reaffirmed at a closely watched meeting on Sunday.
But with global demand for fossil fuels set to peakIts political position is less certain — while countries’ access to the metals and minerals needed for a clean energy transition can increase their influence.
“The transition to clean energy means a transition from a fuel-intensive system to a material-intensive system,” said the International Energy Agency. Report published in 2021, note that a typical electric car requires six times more minerals than a conventional car. It predicts that electric vehicles and battery storage systems will be the top consumers of nickel by 2040, displacing the stainless steel industry.
Indonesia will benefit from this change. After ban on export of nickel ore in 2020 — triggering a trade dispute with the European Union — it quickly developed its own downstream processing capacity with the help of foreign investors. The country now accounts for more than 38% of the global refined nickel supply, according to data from market intelligence firm CRU Group. Its market share continues to increase.
The country is “expected to be the biggest source of growth in the coming years,” said Ewa Manthey, commodity strategist at ING. “Nickel production is increasing sharply to meet growing demand from the EV battery sector.”
Indonesia left OPEC in 2009 and again in 2016 because of Disagreement over production cuts. But government leaders are now arguing that a similar cartel for nickel could be beneficial, fostering partnerships with other top producers. According to Manthey, Russia accounts for nearly 20% of the global supply of the nickel needed for batteries. Canada and Australia are also big players. The second country competes with Indonesia for the world’s largest nickel reserves.
By partnering with other manufacturers, Indonesia could theoretically have more influence over prices. Despite the promising demand outlook, nickel prices on the London Metal Exchange can be very volatile. After a spike earlier this year following the invasion of Ukraine – at one point forcing the LME to suspend trading – they fell sharply. There is currently oversupply as the global economic outlook dims, reducing demand from stainless steel producers.
“If they can control the supply a little bit better, then they can raise the price of nickel a little bit better,” said Alistair Ramsay, Rystad Energy’s vice president of energy metals.
Nickel market watchers doubt that such a deal is possible. That is partly due to the way the industry is set up. While supply is concentrated in a few countries, individual companies are the ones controlling output. That is different from oil production in countries like Saudi Arabia, Russia or the United Arab Emirates, which are dominated by state-owned companies.
“We believe that the idea of Indonesia to form an OPEC-style group for battery metals like nickel will be difficult to come to fruition because, unlike the OPEC countries, the mining activities of the major nickel producers are controlled. controlled by many private companies,” said Jason Sappor, an analyst. Senior metals and mining analyst at S&P Global Commodity Insights.
Indonesia also has no political interference at the moment. A government source told Reuters that Canada was “very unlikely” to join the effort.
Additionally, Nakano of the Center for Strategic and International Studies doesn’t believe it will ultimately help Indonesia, as it could scare off foreign investors when the country is looking to develop the sector. mining.
OPEC’s influence has increased and decreased over the years. The rise of the United States as a major shale producer over the past decade has weakened its position. But the cartel has returned to prominence since the pandemic and Russia’s war in Ukraine roiled energy markets, exacerbating the consequences of its supply decisions.
For countries preparing for a clean energy transition, it seems an attractive model. The Guardian newspaper has report that Brazil, Indonesia and the Democratic Republic of the Congo are seeking to create an “OPEC for the rainforests” to manage conservation efforts. It is also suggested that South American countries such as Argentina, Bolivia and Chile could create a lithium association.
Whether such organizational efforts bear fruit remains to be seen. But the proposals highlight how the hunt for resources will spur a shift away from fossil fuels potentially creating new political alliances.
That is especially true as the competition for resources between the United States and China is heating up. But other countries with direct access to battery metals and other key minerals also want a say.
“The metals market and its importance to the energy transition is something we are all waking up to and adapting to how it works in practice,” said Bronze.
