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Global nickel cartel off the table as Canada’s trade minister rebuffs Indonesia’s approach

We are not looking at that particular model in the way that they have proposed,’ says Mary Ng

Prime Minister Justin Trudeau’s government is keen to strengthen Canada’s relationship with Indonesia, but not so much so that it’s willing to join the nickel cartel that the emerging Asian power is trying to get off the ground.

“It’s an idea that Indonesia has proposed to us, but we are not looking at that particular model in the way that they have proposed,” Trade Minister Mary Ng said after she and three fellow cabinet ministers released the government’s first ever Indo-Pacific Strategy in Vancouver on Nov. 27.

Indonesia is a country on the rise thanks to a increasingly wealthy population of 276 million people and its vast nickel deposits, a metal that is suddenly in high demand because it is central to the production of electric vehicles, which are slowly crowding out cars and trucks powered by internal combustion engines as countries step up efforts to fight climate change.

“We want to be the main players in the EV battery industry,” Joko Widodo, Indonesia’s president, told The Economist magazine earlier this month.

One of the Widodo government’s strategies to do so, apparently, is to become the Saudi Arabia of battery metals. Indonesia, the world’s largest producer of nickel, took advantage of its role as host of this year’s G20 summit to lobby other metal producers to join what it describes as a cartel modelled on the Organization of the Petroleum Exporting Countries (OPEC), and Ng was among the officials who was approached.

Some analysts and industry insiders quickly rebuffed the proposal, saying that the nickel produced in Canada was more environmentally friendly due to its relatively low-carbon footprint, compared to that of Indonesia.

While nickel is primarily used to make stainless steel, it’s being increasingly used as a primary component of battery cathodes, which require exceptionally pure nickel. With automakers seeking low-carbon supply chains to manufacture their electric vehicles, analysts feel that Canada has an advantage that it could lose by joining any such alliance.

According to London-based Benchmark Nickel Intelligence’s October forecast, nickel demand from the lithium-ion battery sector is set to increase by over 600 per cent by 2030.

On Nov. 17, Brazil-based Vale SA inked an agreement to supply General Motors Co. with 25,000 tonnes of battery-grade nickel sulphate annually from the miner’s proposed plant at Bécancour, Que.

Investment in Canada’s nickel sector, as well as other critical minerals needed for EVs, also received a shot in the arm from the Inflation Reduction Act in the United States, which ties billions of dollars in tax credits for EVs to requirements that their batteries be sourced from North American materials — another potential advantage for Canadian nickel producers.

Canada accounted for 6.7 per cent of global nickel production in 2020, which is a far cry from its former No. 1 position in the mid-1960s, when it accounted for 80 per cent.

As of 2020, Indonesia accounted for 30.4 per cent of global supply, more than triple its nearest competitors, the Philippines, which accounted for 12.8 per cent, and Russia at 11.2 per cent. New Caledonia controls eight per cent while Australia was slightly ahead of Canada.

While rebuffing Indonesia’s cartel idea, Ng emphasized that Canada was nonetheless keen to work with Indonesia, which got several mentions in the Indo-Pacific Strategy, including a pledge to “negotiate and implement” a Comprehensive Economic Partnership Agreement with the country.

Canada wants to collaborate with Indonesia on a “whole range of commercial opportunities,” based on the common strengths of the two nations and is “very much at the negotiating table on a free-trade agreement,” Ng said.

Source: Financial Post