Consortium Led by LG Energy Solution Will Invest USD 9 Billion to Build a Battery Supply Chain in Indonesia

published: 2022-04-29 9:30 | editor: | category: News

EV battery suppliers around the world are now scrambling to establish a foothold in the nickel-rich Indonesia. According to the reporting by various news agencies, a consortium led by LG Energy Solution has signed an agreement with Aneka Tambang (Antam) and Indonesia Battery Corporation (IBC) to develop a local battery supply chain in the country. LG Energy Solution is currently the world’s second largest supplier for EV batteries. The agreement was reportedly inked on April 14, right after the world’s largest EV battery supplier CATL had sealed a deal with the same two Indonesian companies to set up an integrated mining and manufacturing project.

Members of the consortium led by LG Energy Solutions include LG Chem, LX International Corporation, POSCO Holdings, and Zhejiang Huayou Cobalt Company. The consortium and the two Indonesian companies have entered into a nonbinding preliminary framework agreement for the development of a local battery supply chain. Further details such as ownership structure will be discussed between parties and arranged in a final contract. A source with the knowledge of this deal told Nikkei Asia that the total investment could come to around USD 9 billion (or CNY 57.3 billion) 

Indonesia is recognized as the country with the largest reserve of nickel resources and the top nickel producer. Data from the US Geological Survey reveals that the global nickel reserve came to around 94 million tons in 2020. Of that total, Indonesia accounted for the largest share of 22% or around 21 million tons. 

Since the start of this year, nickel as a key raw material for lithium batteries used in EVs has been in shortage. Hence, its price has also kept rising. EV manufacturers and companies working in other new energy sectors are now facing the pressure of both supply shortage and rising costs for raw materials. LG Energy Solution is therefore explicit in its aim to establish a presence in Indonesia so as to secure a sufficient supply of nickel. This, in turn, will improve the competitiveness and profitability of its battery business.

Under the agreement, the consortium will set up the following operations in the country: smelting and refining of nickel, manufacturing of precursors, manufacturing of battery anode materials, manufacturing of battery cells, and assembly of finished products. Like CATL, LG Energy Solution is compelled to invest in local facilities for value-added processing of nickel ores and battery production. The reason is that the Indonesian government has begun to restrict the flow of domestic nickel ores to other countries and is even considering a tax on export. 

According to newspaper Korea JoongAng Daily, LG Energy Solution is already building a battery cell plant in Karawang Regency. This is a USD 950 million joint investment project among LG Energy Solution, Hyundai Motor, Hyundai Mobis, and Kia.

Both Antam and IBI are essentially owned by the Indonesian government. Antam is a listed mining company that extracts, processes, and trades various kinds of ores. IBI is a joint venture established by Antam, Indonesia Petroleum Group, State Electricity Corporation, and National Mining Corporation. Its purpose is to foster a domestic battery industry through investments at home and abroad. It is also setting up production capacity for lithium batteries. The Indonesian government is currently targeting a domestic production capacity of 140GWh for EV batteries by 2030. Of that amount, 50GWh will be allocated for export. 

(This article is a translation of a Chinese article written by Wendy from TrendForce. It contains information that is either sourced from other news outlets or accessible in the public domain.)

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