Stellantis considers Indonesia nickel investment

News Analysis




Stellantis considers Indonesia nickel investment

The carmaker is reportedly in talks with Vale to invest in an Indonesian nickel smelter.

The owner of Peugeot, Fiat and Jeep car brands, Stellantis, has been in discussions with Vale and Huayou Cobalt over the potential to secure nickel units for its fleet of electric vehicles (EVs). The company intends to invest €50Bn (US$53.4Bn) in electrification over the next decade as part of plans to reach net zero by 2038. No further information was provided on the commercial details of the potential deal.

Should a deal be concluded, the move would represent a big boost for Indonesia with another rare investment by a Western company in the country. Australian nickel producer, Nickel Industries, already operates several rotary kiln electric arc furnace (RKEF) lines in Indonesia as does French miner Eramet at Weda Bay. The latter has also teamed up with European chemicals producer BASF to joint develop the Sonic Bay high pressure acid leach (HPAL) project at Weda Bay.

Vale now has plans for three HPAL plants in Indonesia, with one of these, Pomalaa, a US$4.5Bn tie-up between Vale, Ford and Huayou. In March, Indonesia’s investment ministry disclosed that PT Vale Indonesia was planning another HPAL with the capacity to produce 60ktpy Ni-in-mixed hydroxide precipitate (MHP) reportedly named “SOA HPAL”.

Crucially, given that Indonesia does not possess a free-trade agreement (FTA) with the USA, this nickel would not currently qualify for inflation reduction act (IRA) EV tax credits. If any Chinese investment were to exceed 25%, it would also disqualify this material from these credits based on the US Department of Energy’s updated foreign entity of concern guidance.

As such, this is a prime example of an automotive company prioritising the access of a large proportion of its future nickel requirements over IRA qualifying material. Despite the potential advantage of the speed at which this plant could be constructed, Indonesia has also faced plenty of scrutiny over the ESG standards of its nickel production, which ranges from carbon intensity, poor worker conditions and deforestation/biodiversity loss. Ford described its direct involvement in the development of the Pomalaa nickel smelter as an opportunity to “…ensure the nickel is mined in line with our company’s sustainability targets, setting the right ESG standards as we scale.”

As the amount of currently available IRA nickel further reduces, it is likely that Stellantis will be joined by further Western companies that may be forced into making a call on investment in the world’s largest source of the metal crucial for EV batteries.