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Indonesia has emerged as the world’s leading producer of nickel, thanks to its vital role in electric vehicle (EV) batteries. With over 14 active mines, Indonesia now supplies more than 40% of global nickel demand, driven by its partnership with China, the largest global EV battery producer.
“Nickel is essential for the electric vehicle sector, which is crucial for advancing environmental sustainability and achieving climate change goals,” noted Jason Sappor, Senior Analyst at S&P Global Commodity Insights.
The rapid expansion in Indonesia’s nickel production is closely tied to Chinese investments, which have significantly enhanced the country’s mining capabilities. Following a 2022 ban on raw nickel exports, Indonesia has focused on refining nickel domestically. Despite the economic benefits, there are growing concerns about environmental impacts, including water pollution and deforestation around mining sites.
The increase in Indonesian nickel production has led to an oversupply, causing lower prices and affecting producers in Australia and Canada. In the U.S., companies like Talon Metals are working to develop local nickel sources under stringent environmental standards. They are partnering with automakers such as Tesla and promoting battery recycling to meet the increasing global demand for EVs and renewable energy.
“It makes sense to source nickel from domestic and free trade allies where it is produced to high standards,” said Todd Malan, Chief External Affairs Officer of Talon Metals. “Although it may be slightly more expensive, it’s not enough to significantly impact vehicle prices.”
In 2020, Tesla CEO Elon Musk urged miners to increase nickel production during a post-earnings call. “Any mining companies out there, please mine more nickel,” Musk said. “Tesla will offer a long-term contract if you mine nickel efficiently and in an environmentally sensitive way.”
The U.S. faces significant challenges with its nickel supply, relying on only one operational mine in Michigan. The U.S. produced 17,000 metric tons of nickel in 2023, compared to Indonesia’s 1.8 million metric tons. Talon Metals is working on opening a new nickel mine in Minnesota, but achieving full production could take decades.