With Consortium
An electric vehicle battery consortium led by LG Energy Solution will begin the construction of a cathode material plant in Indonesia.
Kwon Young-soo, vice chairman of LG Energy Solution, traveled to Indonesia on Aug. 3 (local time) to discuss the LG Consortium project. The LG Consortium includes LG Energy Solution, LG Chem, LX International, POSCO, and Chinese company Huayu.
The LG Consortium was set up to build a complete value chain from securing large-scale minerals such as nickel to producing battery cells. In April 2022, it inked a non-binding investment agreement (framework agreement) with Antam, a state-run Indonesian nickel mining company, and Indonesia Battery Corporation (IBC), an Indonesian battery investment company.
Since then, the LG Consortium has shown interest in investing in nickel mines by unveiling a specific plan to produce electric vehicle batteries in Indonesia. There have been observations that a mine investment announcement will be made soon, but given that Vice Chairman Kwon only mentioned the cathode material plant, it seems that the mine project has been pushed to the back burner.
With only four months left in the year, the likelihood of the plant’s establishment seems high as the leadership of LG Energy Solution, the leading company of the LG Consortium, even revealed the timing of cathode material plant construction. However, there has been no news of the signing of a memorandum of understanding (MOU), which raises skepticism.
In particular, industry insiders believe that disagreements with the local government, consortium members, and strong Chinese capital are the main reasons for the delayed mine investment in Indonesia.
In terms of economically mineable nickel reserves, Indonesia is at the forefront among countries around the world. As of 2020, its nickel reserves stood at 49 million tons, with production at 760,000 tons. With the rapid growth of the electric vehicle market, competition for minerals has intensified, and Indonesia has been controlling the export of nickel ore since 2020 and attracting foreign companies to invest in nickel smelting facilities in India. In response, China has invested US$30 billion in Indonesia to build a large-scale smelting facility.
Under these circumstances, as semiconductor and battery supply chain conflicts between the U.S. and China grows, the Indonesian government has become uncomfortable with Chinese companies investing in Indonesia. The U.S. government has explicitly scratched off China from its electric vehicle battery supply chain through the Inflation Reduction Act, and the Indonesian government is looking for other foreign companies to counter China’s growing dominance in Indonesia. The LG Consortium is one of them.
However, the LG Consortium includes Chinese refiner and smelter Huayu, which is reportedly an issue for the Indonesian government. In February, Hendi Prio Santoso, chairman of Indonesia’s state-owned mineral holding company MIND ID, said, “We don’t think Huayu is the right party to invest in a stake in an Indonesian mine.” Considering these internal and external circumstances, analysts say that the LG Consortium’s investment in the Indonesian mine had no alternative but to be delayed.