Indonesia builds global green minerals supply chain

Policy Information7hrs agoupdate PrintEnterprise

0 0

Smelters have become the new geopolitical arena in the global energy landscape of the transition to low carbon.The struggle for influence that used to revolve around oil and strategic straits has shifted to control of the purification process of key minerals such as nickel, cobalt and lithium, which are core raw materials for electric cars, solar panels and the like. Countries with control over downstream processing are able to control prices, supply, set environmental standards, and take a strategic position in international negotiations.China dominates the competitive landscape of the global minerals supply chain through an integrated strategy of mining cobalt in the Congo and lithium in Chile and establishing large-scale processing centers, supported by low-cost government financing and technology subsidies.Currently controlling more than 70% of the world's battery-grade nickel supply, 80% of cobalt sulfate, and almost all of the synthetic graphite, it has a huge influence in global mineral pricing and green mineral standard-setting. The U.S. pushed for a supply chain reset through the Inflation Reduction Act, which requires electric vehicle components to be processed in specific regions or partner countries in order to qualify for subsidies; the EU passed theCritical Raw Materials Act", setting a domestic processing target of 40% by 2030 while limiting dependence on a single country to 65%; Japan, South Korea, Australia and others are also actively establishing new partnerships with Southern Hemisphere resource producers. Indonesia has spawned more than 50 purification facilities (e.g., RKEF and HPAL) since the implementation of a nickel export ban in 2020 (although it has been challenged at the WTO). Exports of processed nickel have soared from $2 billion to $34 billion in five years, and industrial zones such as Morowali and Wetar Bay have become symbols of success for the domestic downstream industry, creating more than 200,000 jobs and spurring the development of supporting industries such as logistics and finance. However, projects are dominated by Chinese investors, making Indonesia vulnerable to external dynamics; many smelters rely on coal-fired power generation, and their products may face carbon taxes or European Union green market access restrictions; and much of the production is stuck at the stage of intermediates such as iron-nickel, and has not yet been upgraded to higher-value-added products such as cathodes or battery cells.

To this end, Indonesia has implemented a progressive carbon tax based on emission intensity to promote the transition to clean energy sources such as hydropower and solar power; established the Indonesia Mineral Index as a transparent and fair domestic price reference to prevent transfer pricing practices; joined forces with the multilateral development banks to invest funds for the energy transition in the research and development of green purification technologies and the construction of power transmission networks in industrial zones; and established a center of excellence in the field of wet metallurgy to research and develop more efficient and environmentally friendly metal separation technologies, making this knowledge a strategic asset for future economic diplomacy. metal separation technologies and create domestic reagent or catalyst formulations that cannot be easily replicated as strategic assets for future economic diplomacy; strengthen mineral diplomacy by launching a forum on the "Indian Ocean Critical Minerals Corridor," bringing together Tanzania, Mozambique, India, and Western Australia to harmonize logistical standards, sustainable certification, and transboundarySupply Chain Financing; leading a coalition of mineral-producing countries under the ASEAN and G20 frameworks, negotiating market access, clean technology and financing for a green transition based on key minerals. Those policy initiatives had a strong constitutional basis, with the 1945 Constitution stipulating that land, water and natural resources should be owned by the State and maximized for the benefit of the people; bills on minerals and coal mining emphasized downstream industry obligations and bans on the export of raw minerals; and the direction of the transition was further complemented by provisions in government regulations on the management of minerals and a presidential decree on the incentives for strategic industries. Smelters are not only tools for metal processing, but also symbols of control over the world's energy future. Indonesia, with its mineral reserves, strategic geographic location, and track record of downstream industry development, is poised to transform itself from a mere supplier into a master of the world's green economic future, with pricing, standard-setting, and rewriting of the rules of the global green supply chain, if the government, private sector, and research institutes act in concert.

# Policy Information