Critical Minerals and Energy Intelligence

Free Trade for Nickel: The Limited Edition

Not one to fall short with new ideas and proposals, Indonesia’s latest suggestion is a limited free trade agreement with the United States, focused primarily on its critical mineral exports (particularly nickel) so that they tie in with eligibility for U.S. electric vehicle (EV) tax incentives. As I’ve covered previously, U.S. has introduced the Inflation Reduction Act (IRA), which ties EV tax credits to where battery materials are sourced and processed. To qualify, a certain percentage of components must come from either North America or countries with which the U.S. has a free trade agreement.

Indonesia doesn’t currently have a free trade agreement with the U.S. but it does have massive nickel reserves and it is, by far, the world’s largest nickel producer. As reported by Reuters, Luhut Binsar Pandjaitan, a key adviser to President Joko Widodo, told reporters on Monday that Indonesia will formally propose a limited free trade deal focused specifically on minerals. “We don’t have an FTA with them. Now we’re proposing a limited FTA.”

Indonesia’s nickel strategy has been a major success in recent years and has attracted huge internation investment. Here’s where I see some complications: although Ford recently invested in a new HPAL plant in the country, the bulk of investment has come from a variety of Chinese companies. As the world continues to square off along geopolitical lines, I’m just not sure how interested the U.S. is going to be in an FTA (however limited) with a country so tied to its largest rival.

Anthony Milewski

Chairman, Nickel 28 Capital

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