By Fransiska Nangoy
JAKARTA (Reuters) – Chinese companies are in talks with potential investors to reduce their stakes in Indonesian nickel smelters, amid efforts to make their products eligible for U.S. tax breaks for electric vehicles, an Indonesian official said on Friday.
To qualify for an electric vehicle (EV) tax credit, under the U.S. Inflation Reduction Act, the materials for an EV or batteries must be supplied by companies that are no more than 25% owned by a “foreign entity,” which means applies to companies from China, Russia, North Korea and Iran.
Indonesia, the world’s largest producer of nickel, has negotiated a crucial minerals deal with Washington to allow its nickel to enter the IRA-recognized supply chain.
But the Southeast Asian country’s nickel industry is dominated by Chinese companies such as Tshingshan Holding Group, Zhejiang Huayou Cobalt and Lygend Resources and Technology.
Chinese companies are approaching Indonesian and South Korean companies for possible partnerships in high-pressure acid leaching (HPAL) plants under construction and in the planning stages, Septian Hario Seto, a deputy coordinating minister for Maritime and Investment Affairs, told Reuters on Friday.
HPAL is a method of producing nickel material used in EV batteries from nickel ore.
The aim is to reduce the interests of the Chinese companies and qualify for the tax breaks in the US market, said Seto, who oversees the mining sector at the coordinating ministry, adding that Indonesian companies are also looking to majority shares in such projects.
“The Chinese company will act as the technology supplier, the Indonesian investors will be the ones who will supply the nickel ore and the Korean investors will be the buyers,” he said.
The Financial Times reported on Thursday that the Indonesian government and industry are structuring new investment deals with Chinese companies as minority shareholders.
Seto said the efforts are business-to-business, without government intervention.
During a visit to Jakarta last week, US official Jose Fernandez said the two countries’ negotiations on the crucial minerals deal were progressing positively, but he shared no details on the timeline.
