Indonesia plans free trade agreement for battery raw materials
The country wants to attract foreign investors with free trade agreements for battery raw materials and make better use of its mineral resources

Indonesia, the world's largest nickel producer, is planning a free trade agreement with the United States for battery raw materials to attract American investors to its mineral resources. Last year, the government imposed an export ban on nickel ore to create jobs at its smelters. However, this restricted access for foreign companies and investors.
The proposed free trade agreement for battery raw materials is similar to the agreement the U.S. reached with Japan in March. Luhut Pandjaitan, Indonesia's Coordinating Minister for Investment, plans to use the U.S. Inflation Reduction Act, which requires that a certain value share of batteries for electric cars be manufactured locally or by free-trade partners. This agreement would allow U.S. automakers like Tesla to invest heavily in the commodity market.
The electric vehicle market is becoming increasingly important worldwide, and the demand for raw materials for battery production is rising accordingly. Indonesia has huge deposits of raw materials such as lithium, cobalt and nickel, which are essential for building batteries. The two battery manufacturers CATL from China and LG Group from South Korea are already planning to set up their own battery factories in Indonesia.
However, there are also concerns about the environmental impact, as most plants in Indonesia run mostly on coal-fired power and generate large amounts of wastewater and toxic tailings. However, the government of Indonesia is planning measures to reduce the environmental impact and is relying on high-pressure acid leaching (HPAL) to reduce costs. Experts estimate that success in using HPAL technology will allow Indonesia to increase its supply share of the world nickel market from 30 to 65 percent.
Indonesia hopes that the proposed free trade agreement with the U.S. will encourage investment in the country's extractive industries. However, it remains to be seen how the negotiations between the two countries will proceed and whether the environmental impact caused by the increased production of raw materials for batteries will be sufficiently taken into account.
