Eramet and Huayou in talks over Indonesian nickel collaboration

News Analysis




Eramet and Huayou in talks over Indonesian nickel collaboration

The partnership could involve Eramet supplying ore to the Huayou’s HPAL in Weda Bay, Indonesia.

Roughly two weeks after French mining company Eramet and BASF confirmed that they would abandon development of the US$2.6Bn-rated Sonic Bay nickel-cobalt refining project in Indonesia, Eramet is now reportedly in talks with Chinese battery chemicals producer Huayou over a partnership in the country. The form that such a collaboration would take remains unclear given that neither Eramet nor Huayou has confirmed reports, but one option could involve Eramet supplying limonite ore from its nearby nickel mine in Halmahera to Huayou’s Huafei high-pressure acid leach (HPAL) in Weda Bay. Eramet may also look to take a stake in the Huafei plant, which is the world’s largest HPAL, with a capacity to produce 120ktpy Ni-in mixed hydroxide precipitate (MHP). 

The significance of the news is that it reconfirms the challenge of investing in battery metals without the presence of Chinese players. This is especially the case for battery-grade nickel projects in Indonesia, which has become the key source for growth as the demand for intermediates rises to supply the EV battery sector. Of the 21 HPAL projects being planned in Indonesia and tracked by Project Blue (excluding multiple phases), the vast majority of these are being developed with the support of Chinese investment. This reflects the investment appetite for Chinese players within the region and also the technical know-how that these companies bring within the field of hydrometallurgy.

Alongside Indonesian nickel’s ineligibility for US Inflation Reduction Act (IRA) EV tax credits due to the country’s lack of a free trade agreement (FTA) with the USA, the dominance of Chinese ownership of these projects breaches the US government’s foreign entity of concern (FEOC) limits. This means that if 25% or more of an entity’s equity interests are cumulatively held (either directly or indirectly) by the government of a US ‘covered’ nation (China, Iran, North Korea & Russia), the entity will be classified as a FEOC.

Indonesia’s apparent difficulty in attracting and retaining Western investment is a dilemma that the Philippines is increasingly positioning itself to exploit. In June, the Philippines under-secretary of the Department of Trade and Industry told the Financial Times that “there is room now for the Philippines to be a significant player for batteries.” At the same time, the undersecretary stated that the Philippines had “a really strong argument to go for a non-Chinese investor so that we can be a supplier of non-Indonesian nickel.” Despite the bullish intentions, just how quickly and to what extent the Philippines could develop an integrated battery-grade nickel ecosystem remains doubtful.

Despite Eramet’s Sonic Bay setback, and recent difficulties at Doniambo in New Caledonia, the company has experienced considerable success in Indonesia, developing the world’s largest nickel mine on the island of Halmahera. Eramet’s recent pledge to continue evaluating potential investments in the nickel EV battery chain in Indonesia serves to illustrate the untapped potential it sees in the Southeast Asian country.