Indonesia boosts nickel, rare earth mining as demand surges for defense industry components
Gusty Da Costa
Rising demand for minerals vital to the defense industry, such as nickel and the class of minerals known as rare earth elements (REEs), has spurred the Indonesian government to enhance measures to process and explore for the materials.
Possessing 37% of the world’s nickel output and 22% of its reserves, Indonesia is currently the top producer of the metal, according to a February 2023 report by Australia’s Lowy Institute. (Pictured: Nickel ore from a mine near Kendari in Southeast Sulawesi province, Indonesia.)
Nickel, a vital component in lithium-ion batteries, has become highly important to the world’s defense industry, as lithium-ion batteries are increasingly used in defense systems, particularly portable ones. Nickel is also widely used in plating military hardware to reduce corrosion and enhance durability.
Jakarta ceased exports of raw nickel ore in 2020, choosing to upgrade its refineries and boost exports of refined nickel and nickel alloys, the Australia-based Lowy Institute reported. This resulted in an increase in total nickel ore output and in exports of nickel-based metals. Foreign direct investment has also shifted from mining to the country’s metal industry.
While the industry focuses on refining nickel for stainless steel production, Indonesian companies are working to process nickel ore for lithium-ion batteries. By becoming an exporter of battery-grade, high-purity nickel, Indonesia could provide importers an alternative to Russian products. Russia supplies one-fifth of all nickel used in batteries worldwide, according to the Financial Times newspaper.
In possible recognition of Indonesia’s blossoming nickel industry, South Korea’s Hyundai Motor Group opened its first lithium-ion battery factory in Indonesia in 2022, with other South Korean manufacturers set to invest heavily soon, Lowy reported.
“The Indonesian government has issued several regulations that fully support the development of downstream mining products from raw materials into metal products,” Julian Ambassadur Shiddiq, head of the Minerals and Coal Testing Center of Indonesia’s Energy and Mineral Resource Ministry, told FORUM.
“We have moved into the second and third phase of the development of downstream industry, including further extraction of REEs, and plan to produce the end products domestically in accordance with the Strategic Industry Program in the Master Plan of The National Industry Development.”
The ministry’s Geological Agency is exploring the potential of REEs in Indonesia, the acting head of the agency, Dr. Muhammad Wafid, told FORUM. Based on the agency’s findings, the government will then begin issuing mining operation permits.
The agency completed REE exploration projects in the provinces of North Sumatra and West Sulawesi in 2022, Wafid said. By digging ditches and wells and using both georadar and geomagnets, agency teams generated maps to indicate mining potential of specific REEs. The promising results prompted mining companies to apply for permits to mine in the two provinces.
The agency plans five more exploration projects for 2023, Wafid said.
So far, explorations have revealed the presence of such REEs as monazite and xenotime, Shiddiq said.
Monazite can be refined for use in strong permanent magnets that are critical for decarbonization technologies, he explained. They are “needed by the domestic and global market for battery-based electric vehicles and the hydropower plant turbine industry that supports green energy and net zero emission of greenhouse gas,” he said.
Other REEs found in Indonesia will be used by the defense and security industry. But industry officials also aspire to engage in more than mining them.
“We have rare earth metal minerals potential but have yet to process them,” Shiddiq said, expressing hope that Indonesia will soon procure refining and extraction technology through partnerships with Australia or others.
Gusty Da Costa is a FORUM contributor reporting from Indonesia.
IMAGE CREDIT: GETTY IMAGES
