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U.S. And Indonesia Discuss Cooperation On Critical Minerals

The United States and Indonesia are discussing cooperation in critical minerals as U.S. President Joe Biden meets with his Indonesian counterpart Joko Widodo on Monday.

The two countries are expected to discuss the idea of signing some sort of an agreement on critical minerals, senior officials told Bloomberg ahead of the meeting.

Indonesia is a dominant player in the global market of nickel, a metal crucial to battery production and the energy transition.

This weekend, sources familiar with the plans told Reuters that the two presidents are expected to discuss the possibility of striking a minerals partnership aimed at boosting nickel trade.

Still, there is a lot of work before the U.S. and Indonesia could formally launch any potential negotiations on a critical minerals partnership because the Biden Administration has concerns about the environmental impact of the nickel supply chain in Indonesia, according to one of Reuters’ sources.

Indonesia, the largest economy in Southeast Asia, holds the world’s largest reserves of nickel and accounts for nearly 90% of planned nickel refining facilities, according to the International Energy Agency (IEA).

Indonesia is also competing with other countries in the Association of Southeast Asian Nations (ASEAN) including the Philippines, Thailand, and Vietnam, to attract EV manufacturers as it looks to move up the value chain.

Indonesia looks to develop its EV production capabilities as demand grows. The government hopes to be producing 13 million electric motorcycles and 2.2 million electric cars by the end of the decade. Indonesia has a well-established metals and minerals industry, with huge nickel reserves. Nickel is a vital component of EV battery production and sourcing it locally can help cut manufacturing costs. 

The United States, for its part, is looking to reduce its dependence on Chinese materials by boosting domestic production, where possible, and signing supply agreements with friendly nations.

Indonesia, which doesn’t have a free trade agreement with the U.S., asked in September the United States to start talks on a critical minerals agreement, which could make Indonesian supply covered by tax credits in the Inflation Reduction Act (IRA).     

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By Tsvetana Paraskova for Oilprice.com

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