Battery Metals

The value of Indonesia’s nickel exports surged tenfold in five years after it forced buyers to set up refineries in the country. Now Southeast Asia’s biggest economy plans to use that blueprint to catapult the nation into the ranks of higher-income economies by processing everything from copper to fish.

The goal is to double per-capita GDP to $10,000 by 2045, which would bring Indonesia close to the World Bank’s high-income threshold. At the same time, the shift would create new centers of growth outside Java, its richest and most populated island.

“We’re using nickel as the prototype,” said Investment Minister Bahlil Lahadalia. “It’s silly. We have the raw materials, but we sell it to be refined overseas then we import it back. Where did we leave our brain?”

President Joko Widodo points to the economic models of Taiwan and South Korea, two of only handful of nations that managed to escape the so-called middle-income trap by building manufacturing and raising productivity. For decades, Indonesia has relied on exports of raw commodities — an economic strategy prone to the so-called resources curse, where mineral rich nations suck in investment in mining during boom times, but suffer when commodities prices tumble.

The new roadmap to more onshore processing will begin with oil and gas this year, then fisheries. Down the line, Indonesia will only export refined palm oil, coconut products, timber, seaweed and even salt. The government estimates the drive could pull in $545 billion of investment — about half the country’s current nominal GDP.

“We used to sell the Indonesia story by the numbers: 280 million people, thousands of islands, and so on. That’s promoting history, not investment,” Lahadalia said. “Now we tell them: ‘What industry do you want? Here’s what you can make and here’s where you can do it.’”

The investment ministry publishes a menu of projects that investors can choose from, complete with the expected rate of return, breakeven timeline and state incentives available. It includes, for example, a 49.8 billion rupiah ($3.3 million) cocoa bean factory in Central Sulawesi offering a 22% return, or a $1.13 billion copper refinery in East Java with a 16% expected return.

There are signs the policy could work. The country charted its largest-ever trade surplus last year, with investments rising 44% to a record $80 billion, underpinned by nickel and copper that are mainly found on islands outside Java.

In North Maluku, investments in nickel refining expanded the province’s economy by 29% last year.

“Companies have mined nickel there for decades, but it’s only now that we see this massive growth,” said Lahadalia. “With growth, comes jobs. People don’t have to go to Java anymore to look for good jobs.”

In West Papua, one of the country’s poorest provinces, factories are being built to turn natural gas into methanol, urea and ammonia to be used as fertilizers. And throughout the archipelago, plants are being set up to process and package tuna and shrimp ready for consumers, rather than shipping the catches to facilities in Thailand or Vietnam.

Still, Indonesia’s nickel windfall was partly a result of a sudden surge in global demand from factors including the ramp-up of battery production for electric vehicles and a notorious short-squeeze on the London Metals Exchange that gave Indonesia a strong bargaining position to force miners to build smelters. There are also questions over how the government will turn the billions of dollars in smelter investments into wider investment in technology and high-skilled jobs that would boost overall productivity.

There are also legal risks. The World Trade Organization recently ruled in favor of the European Union’s protest against the ban on nickel ore exports. Jokowi has vowed to appeal the ruling and refused to change his policy.

And while Indonesia so far has relied on export bans to force companies to build local downstream facilities, the government has said it wants now to take a softer approach, gradually removing incentives for less-refined goods. For nickel, that means no more tax holidays for smelters that put out products with less than 40% nickel content as the government pushes for at least 70%-80%.

“But we won’t wait,” Lahadalia said. “If we say the industry needs to be ready before we stop exports, it would take too long and we would get the same old excuses.”

For copper giant Freeport-McMoRan Inc., whose local unit has been mining one of the world’s largest deposits of copper and gold since the 1970s, exports of concentrates will stop at the end of this year, when a new smelter needs to be up and running, he added.

Lahadalia is confident the downstreaming strategy won’t be derailed by elections in February next year, when Jokowi must step down after the end of his second term. The shift is already locked into the economy as smelters and factories are already being built, he said.

“Besides, anyone who reverses this would be laughed at,” he said. “We’re halfway there. Why would we go back?”

Top automakers including Tesla Inc., General Motors Co. and Ford Motor Co. are heading out on the mining conference circuit as soaring demand for metals used in electric vehicles ignites a scramble to lock in long-term supplies.

Those major US firms, along with Rivian Automotive Inc. and European counterparts Stellantis N.V., Mercedes-Benz Group AG and Jaguar Land Rover Automotive Plc, will be mingling with the crowds of mining industry executives attending a major metals conference in Florida next week, according to multiple attendees who received a list of the event’s guests.

Bank of Montreal, which is organizing the annual gathering, wouldn’t disclose the names of automakers attending the four-day event, which is expected to attract almost 1,500 participants to Hollywood, Florida. Still the firm sees strong interest from several car manufacturers that are seeking to secure supplies of lithium, nickel, graphite and other battery metals.

“There’s an urgency to it now that wasn’t there a few years ago,” Ilan Bahar, co-head of global metals and mining business at BMO Capital Markets, said in an interview. “If three or four years ago we had invited car companies to our conference, they probably wouldn’t have made it a priority.”

It’s unusual for massive end-users of raw commodities, like auto manufacturers, machinery producers or aerospace companies, to attend large mining conferences. But the huge demand for raw materials to support the electrification of those industries is changing that.

Bahar said a number of automakers are attending, including officials in procurement or corporate development, and are focused on securing supply and investing.

“They’re there as investors,” he said. “They want to meet with companies, and the companies want to meet with investors.”

Car companies are making inroads into the mining industry to lock in supplies of much-needed materials, putting them in direct competition with large, deal-hungry metals producers. GM is competing for a stake in Vale SA’s base metals unit and in January struck a $650 million pact with Lithium Americas Corp. to develop the largest US lithium deposit. Meanwhile, Tesla has been weighing a takeover of miner Sigma Lithium Corp.

“We’ve seen investments they’ve made directly in mining companies, primarily to secure offtake,” Bahar said. “The nature and capital structure of how people are investing is evolving.”

US Treasury Secretary Janet Yellen said on Friday that she expects that future limited free trade agreements focused on battery minerals with the European Union and other trusted allies would not need approval from Congress.

Yellen told reporters on the sidelines of a G20 finance meeting in India that such agreements, which would be aimed at granting automakers based in Europe, Japan and other countries access to new US tax credits for electric vehicles, would also likely include high labor standards and export control provisions to ensure secure supply chains.

Such mineral pacts are one potential way to address European Union’s complaints that its automakers are shut out of the $7,500 per vehicle tax credits in the climate-focused Inflation Reduction Act, which it argues will suck electric vehicle investments away from Europe.

The law specified that the tax credits were only available to North American-assembled vehicles that meet certain local battery production and mineral extraction processing standards.

Countries with US free trade agreements can also access the credits, and this is a provision that the Biden administration hopes to exploit by negotiating limited trade deals focused on battery minerals.

The Treasury already is allowing leased electric vehicles to qualify under commercial EV tax credit rules, a move that Yellen said would cover most vehicles for now. Over time, she said she hoped that trade agreements would allow more sold vehicles to qualify over time.

“It would be an agreement that we think would not require the agreement of Congress,” she said adding that Congress intended “a kind of friend-shoring approach” for critical minerals to reduce reliance on China.

“I think the word ‘free trade areas’ was meant to mean reliable friends and partners with whom we can feel we have secure supply chains so we feel this is fully the intent of Congress and we’ll be able to negotiate such agreements,” Yellen said.

The Treasury in March is due to put out guidance on the sourcing of battery minerals and Yellen said this will include guidance on free trade areas that can qualify.

The Treasury already has said that it will qualify existing comprehensive free trade pacts Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru and Singapore.

Yellen said that the United States and Europe were getting closer to reaching understanding over the US green energy subsidies, and said Washington will not try to stop Europe from enacting competing subsidies.

“We’ve been very clear with Europe that this is not a subsidy war,” Yellen said. “We’re not trying to steal jobs. This is our climate plan.”

Chile’s SQM, the world’s second-largest lithium producer, has partnered with blockchain startup Circulor to map emissions across the lithium supply chain for carmakers like Volvo Cars, the two companies said on Wednesday.

Legislative pressure is rising on electric vehicle (EV) makers and battery producers to track the human rights and environmental impact of their supply chains.

SQM and Circulor say they have been working together on “end-to-end lithium supply chain traceability” since last year, tracking lithium from Chile all the way to an EV battery, which should provide carmakers with greater accuracy in calculating the embedded carbon footprint of their products.

“We have the lowest CO2 and water footprint of any lithium producer in the world, and Circulor’s technology will now enable us to demonstrate this at every stage of the value chain,” SQM chief executive Ricardo Ramos said in a statement.

Circulor uses blockchain technology to map supply chains for companies pursuing greener, more sustainable production. The UK startup is working with a number of carmakers including Volvo and Polestar.

The company also recently announced a partnership with StoreDot, an Israeli startup developing fast-charging batteries.

The carbon footprints of rechargeable EVs, light transport and industrial batteries sold in Europe must be disclosed from 2024, and they must comply with a CO2 emissions limit from 2027.

An ongoing debate within the auto industry about which type of battery to put in electric vehicles is not going in favor of the millions of Americans living in colder climates. Multiple brands are switching from the current standard, nickel cobalt manganese (NCM), to a cheaper, more abundant version, known as lithium iron phosphate (LFP)—primarily on their cheaper vehicles.

There are plenty of pros and cons for both chemistries, though a known con of LFP batteries is their range drops faster in cold weather due to lower energy density. However, their lower cost and higher availability are appealing to car companies seeking to reduce vehicle wait times and keep prices down as the cost of NCM materials is at an all-time high.

Sub-par performance in cold weather is a known EV issue, even with LCM batteries that power the majority of EVs today. Multiple lawsuits claim brands like Tesla(Opens in a new window) and BMW(Opens in a new window) overstate vehicle range given they are simply not achievable in cold temperatures. In PCMag’s own testing of a brand-new Tesla this winter in Chicago, the vehicle got half the advertised range.

“On average EVs lose about 40% of their range in cold temperatures,” says Greg Bannon, director of automotive research at AAA, which published a detailed study(Opens in a new window) on the topic. “You can find yourself in a situation where you thought you could get to where you’re going, but then your range is as much as 50-60% less than advertised. So yeah, it’s a real issue for people in cold climates and we’ve shouted it from the rooftops.”

Carmakers have their backs against the wall between high costs and the desire to accelerate their rapidly growing EV businesses. The Biden administration also wants 50% of new car sales to be electric by 2030. Six states (and counting) have committed to 100% electric after 2035. Many questions regarding infrastructure and vehicle price, as well as cold weather performance, must be solved to make this transition fair for a wide variety of drivers.

Making LFPs ‘Standard’

In November, Rivian CEO RJ Scaringe told(Opens in a new window) the Wall Street Journal that it’s “quite bullish on LFP,” which the company uses in its standard range models. Rivian reported significant financial losses in Q3 2022, making cost-effective LFP an attractive option. It declined to comment when asked about the potential performance drawbacks of LFPs in cold weather.

Tesla is also using LFP batteries in at least half(Opens in a new window) of its more affordable standard range vehicles to keep costs down.

Last week, Ford announced it will follow suit and move away from 100% NCM in the coming years. A new Michigan battery plant will manufacture LFP batteries, which Ford will swap into certain vehicles that use NCM today.

“Mitigating the current supply chain limitation by diversifying battery chemistry does make sense,” says Gleb Yushin, CTO and co-founder of Sila(Opens in a new window), which makes silicon battery materials. “The shift from high-performance, nickel-based NCM chemistry to lower performance but also lower-cost, iron-based LFP chemistry will likely enable Ford to accelerate its electrification roadmap. But this move does come at a cost.”

LFP and NCM: What’s the Difference?

LFP’s reduced energy density comes down to the material properties. All EV batteries comprise two main components: an anode and a cathode. Both LFP and NCM typically have the same anode, made of graphite, but different metals in the cathode. NCM uses lithium, cobalt, and manganese, and LFP uses lithium and iron.

“NCM has a layered, densely packed crystal structure,” Yushin explains. “This enables high lithium storage per unit volume. In contrast, LFP has a much more open, olivine crystal structure, which does not allow lithium storage to be dense.”

He also notes that LFP batteries suffer from both lower battery voltage and smaller volumetric capacity, two main reasons for lower LFP energy density.

Does My EV Have LFP or NCM?

Today, EV shoppers can see a vehicle’s EPA-estimated range—i.e. 250 miles—but the EPA and auto industry lack a standard way to convey a range floor with repeated use in cold weather. The need for such a metric increases once LFP batteries become more commonplace. However, the companies already using them have chosen not to disclose battery type to future customers.

For example, Rivian’s online vehicle configurator makes no mention of LFP or NCM. Instead, buyers can choose a standard range truck (260 miles), which likely runs on an LFP, spend an extra $6,000 for a “large pack” (328 miles), or add $16,000 for a “max pack” (400 miles).

The same goes for Tesla, though Tesla offers a way for vehicle owners to check their battery type after the vehicle is in hand. “Some vehicles are equipped with a Lithium Iron Phosphate (LFP) Battery,” says Tesla’s website(Opens in a new window). “To determine if your vehicle is equipped with an LFP battery, navigate to Controls > Software > Additional Vehicle Information.”

If customers have an LFP vehicle, they can regularly charge to 100%. This is a benefit over NCM, which is only recommended to charge to 80-90%, especially for customers in warmer weather, where the cars will retain the extra power more easily.

Ford is also not planning to disclose battery type to customers, even if its LFP announcement suggests customers can choose. “Offering LFP as a second battery chemistry—in addition to nickel cobalt manganese (NCM)—allows Ford customers to choose an electric vehicle with unique battery performance characteristics most aligned with their needs,” Ford says(Opens in a new window).

When PCMag asked whether customers will specifically select an LFP or NCM vehicle, Ford said not exactly. “Customers won’t choose a specific battery chemistry,” says Hannah Ooms, communications manager for Ford’s battery division.

When asked about the features cold weather customers should look for, Ooms recommended they select an extended range version if buying today, while Ford vehicles are 100% LCM. Once LFP vehicles hit the market, they should “have a conversation with their dealers.” It’s unclear at this point what additional knowledge dealers will have to help cold weather customers.

Extended range versions cost tens of thousands more than standard range. Take the Ford F-150 Lightning, XLT trim, for example. The standard range model has 230 miles and starts at $63,474. The extended range goes 320 miles, and starts at $80,974. In cold weather, it may only regularly achieve 192 miles, to use AAA’s 40% range reduction estimate. This effectively pushes buyers to spend the extra cash for an extended range today, before LFP batteries enter the mix.

Extended range versions cost tens of thousands more than standard range. Take the Ford F-150 Lightning, XLT trim, for example. The standard range model has 230 miles and starts at $63,474. The extended range goes 320 miles, and starts at $80,974. In cold weather, it may only regularly achieve 192 miles, to use AAA’s 40% range reduction estimate. This effectively pushes buyers to spend the extra cash for an extended range today, before LFP batteries enter the mix.

There is another issue with LFP batteries: reduced pickup truck towing power. “For an F-150 Lightning customer [who] often tows or hauls, NCM batteries will be a great fit…because those customers value the power and longer range made possible by NCMs,” Ooms says.

Once Ford introduces LFP batteries, only the more expensive, extended range pickups will achieve the baseline capabilities customers switching from gas-powered trucks are expecting.

Endless Pros and Cons

LFP batteries offer unique benefits, like the lack of cobalt, which has come under fire for inhumane mining(Opens in a new window) conditions in the Democratic Republic of Congo. They are also less likely to catch fire based on their chemical properties.

But, they’re heavier. Given their lower energy density, it takes a bigger battery to get the range customers are expecting. Adding more ultra-heavy vehicles on the road will increase that risk of deadly crashes, the National Transportation Safety Board (NTSB) warns.

LFP batteries are also less recycling-friendly than NCM. “NCM is more expensive only because it uses more expensive raw materials, particularly nickel,” Yushin says. “When you recycle NCM, you can get nearly all the valuables, all the metals back, so there is a significant economic value in that. In contrast, iron is very cheap.”

This makes it harder for recyclers to turn a profit on reselling the raw materials, so there’s little incentive to create a recycling industry for LFP. Thus, there’s a need for more mining and importation of new foreign materials.

Both battery types affect different customers for different reasons. But as the EV industry matures to include two distinct chemistries, car companies and the EPA owe consumers more concrete information on the trade-offs and what to expect from their vehicle.