Indonesia is restructuring its nickel mining and processing projects to reduce Chinese investment, according to the Financial Times.
This strategy aims to help Indonesia qualify for the US Inflation Reduction Act (IRA), which offers tax breaks starting in 2025 but excludes electric vehicles (EVs) that use critical minerals like nickel sourced from “foreign entities of concern.”
To align with IRA requirements, the Indonesian government and industry leaders are negotiating new investment deals that will make Chinese companies minority shareholders, potentially allowing for the attraction of IRA tax credits.
As the world’s largest nickel supplier, Indonesia has experienced a significant influx of Chinese capital in recent years.
However, the IRA specifies that EVs with batteries and critical minerals sourced from companies with over 25% Chinese ownership will not be eligible for tax breaks.
This regulation has prompted Indonesia to explore new investment structures and potentially negotiate a trade agreement with the US specifically for its nickel sector.
Septian Hario Seto, Indonesia’s Deputy Coordinating Minister for Investment and Mining, stated that government officials have been in discussions with investors to develop new smelters in which Chinese companies will hold less than a 25% stake.
Seto also mentioned a new $700 million smelter project currently in development, featuring a Chinese company as a minority partner, alongside firms from Indonesia and South Korea.
