Indonesia's export restrictions on raw materials will likely exacerbate the shortage of nickel and subsequently of EV batteries, potentially hindering the rapid advancement of the EV industry.
As the global automotive industry picks up the pace of electrification, there will be a corresponding increase in the demand for nickel, which is a key ingredient for automotive batteries, according to TrendForce. Incidentally, Indonesia has recently made gradual announcements indicating that it intends to terminate the export of such unprocessed ores as nickel, copper, and tin, and this restriction will likely have an impact on the global supply chains in which these materials are used.
Indonesia possesses the world’s highest volume of nickel reserves (which refer to the total availability of nickel in the country), at 21 million tons, representing more than 20% of the global total. With regards to nickel production (which refers to the actual amount of nickel that is mined), on the other hand, Indonesia accounts for more than 30% of the global total. As such, Indonesia is the primary source of raw materials for NEV (new energy vehicle) batteries manufactured by countries such as China.
TrendForce further indicates that, as a key upstream material for EV battery manufacturing, nickel is primarily used for raising the energy density of NCM batteries. As EV battery development progresses towards increasingly high energy densities, the direction of cathode development has gradually trended towards nickel-rich NCM as the mainstream. Hence, the consumption of nickel in EV battery cathodes has been undergoing a steady growth.
As the volume of NEV sales increases, so has the installation volume of EV batteries. Take the Chinese automotive market as an example; cumulative NEV sales for the January-July period this year surpassed the annual sales volume for 2020. TrendForce expects annual NEV sales in China to surpass 3.3 million units this year (including both heavy and light vehicles), representing an over 140% year-on-year (YoY) growth.
Likewise, cumulative EV battery installation in China for the January-October period reached 107.5GWh, a 168.1% YoY increase, while automotive NCM battery installation reached 54.1GWh, accounting for 50.3% of the total EV battery installation. These figures would suggest that the growth of the NEV market in China has generated a definite increase in the demand for nickel.
TrendForce believes that the NEV market will continue to expand its demand for battery materials, including primarily nickel, for several reasons: First, the penetration rate of NEVs has been rising at an increasingly rapid pace. Second, EV cathode development has been trending towards a nickel-rich composition.
Finally, nickel-rich NCM materials are suitable for fulfilling the automotive market’s demand for high energy density batteries. Indonesia’s decision to terminate the export of certain unprocessed ores may not have an impact on the global supply chains in the short run. However, going forward, this decision will likely transform the supply situation of the nickel industry, force battery manufacturers or nickel chloride suppliers to establish facilities in Indonesia, and eventually raise the added value of products related to the Indonesian nickel industry.
Nevertheless, whether the production capacity generated by the establishment of facilities in Indonesia can satisfy the market demand in time will depend on not only the quality of Indonesia’s infrastructures and electricity supply, but also domestic political environments, availability of labor force, and other external factors.
Therefore, TrendForce believes that, in the long run, Indonesia’s export restrictions on raw materials will likely exacerbate the shortage of nickel and subsequently of EV batteries, thereby potentially hindering the rapid advancement of the EV industry.