Indonesia is set to propose a free trade agreement to the US for some minerals they are shipping there. This proposal will let companies in the EV battery supply chain in the country benefit from US tax credits.
Under the Inflation Reduction Act (IRA), Washington has released new guidance for EV tax credits requiring a certain value of battery components to be produced or assembled in North America or a free trade partner.
Free Trade Agreement
Currently, Indonesia doesn't have a free trade agreement with the US. However, the Asian country's nickel products are becoming essential in the battery supply chain. Indonesia has been leveraging its nickel reserves to attract investment from EV and battery makers.
Indonesia will meet with Ford and Tesla executives to discuss the free trade agreement. The agreement will likely be the same as Washington's signed with Japan for the critical mineral trade.
It can also be recalled that Ford signed an agreement with an Indonesian unit of Brazilian nickel miner Vale and China's Zhejiang Huayou Cobalt for a $4.5 billion partnership for a nickel-processing plant in the Sulawesi Island in Indonesia.
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Indonesia and Its Critical Minerals
This picture taken on February 8, 2023 shows workers using excavators during an exploration for nickel ore by Gema Kreasi Perdana (GKP) on Wawonii island in southeast Sulawesi.
Indonesia has emerged as a key player in the global market for critical minerals, particularly in producing materials used in electric vehicle (EV) batteries. The country's abundant reserves of nickel, cobalt, and lithium make it a prime location for mining and processing these materials, which are essential for producing high-performance batteries.
Nickel is a critical component in the production of EV batteries, with Indonesia being the world's largest nickel ore producer. The country has a vast reserve of nickel laterite ores, which is ideal for producing nickel pig iron (NPI). NPI is a low-cost alternative to pure nickel, widely used in making stainless steel and other industrial applications. In recent years, Indonesia has been ramping up its production of NPI to meet the growing demand for nickel in the EV industry.
The Indonesian government has been actively encouraging investment in mining and processing these critical minerals to promote the country's economic growth and achieve its national development goals.
In 2021, the government announced plans to build a lithium battery plant in the country, to increase the country's capacity to produce EV batteries.
Indonesia's abundant reserves of critical minerals such as nickel, cobalt, and lithium make it a key player in the global market for EV batteries. The country's strategic location, coupled with its supportive government policies, makes it an attractive destination for investment in mining and processing these critical minerals. As EV demand continues to grow, Indonesia is well-positioned to play a significant role in the global supply chain for vital minerals.
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