Coordinating Minister for Economic Affairs, Luhut Binsar Pandjaitan, met with Tesla CEO Elon Musk at the company’s Gigafactory in Austin, Texas, to restart talks about the possibility for Tesla to take part in the nickel and battery industry in Indonesia.

Indonesia is the largest source of nickel ores globally, hosted in laterite deposits. Indonesia’s nickel strategy is part of the country’s commodity-led development strategy, which aims to attract investment to add value to the country’s economy.

To achieve this, Indonesia first imposed a ban on nickel ore exports in 2014, leveraging the reliance of Chinese nickel pig iron (NPI) smelters on imported materials, largely sourced from Indonesia. With limited alternatives, the ban saw NPI smelting capacity ramp up, but the ban was relaxed in 2017 to encourage more upstream investment. With rapidly growing exports to China, the export ban was reinstated in January 2020, ahead of the planned 2022 timeline.

Indonesia has managed to attract significant stainless steel capacity through Chinese companies, the largest demand sector for nickel. In addition to stainless steel, nickel is a key component in Li-ion batteries for electric vehicles (EVs) and nickel producers in Indonesia are looking to join the battery supply chain, as demand growth from EVs is set to make batteries a significant consuming sector for nickel.