Tesla wins $5 billion contract to supply nickel from Indonesia

US automaker Tesla has signed contracts worth about $5 billion to purchase materials for its batteries from nickel recycling companies in Indonesia.

The largest economy in Southeast Asia is trying to force Tesla to open production in a country with large reserves of nickel. Earlier this year, President Joko Widodo met with Tesla founder Elon Musk to raise investment. Tesla has reportedly signed a five-year contract with nickel refining companies operating in Morowali on the island of Sulawesi. Nickel materials will be used in Tesla’s lithium batteries.

Indonesia is keen to develop electric vehicle and battery production at home and has stopped exporting nickel ore to secure supplies for investors. The move attracted investment from Chinese steel giants and South Korean companies such as LG and Hyundai.

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As for South Korea’s LG Energy Solution (LGES), the company began building nickel refineries in Indonesia, part of the company’s $9.8 billion investment in electric vehicle batteries.

The company will build a $3.5 billion steel smelter with a capacity of 150 000 tons of nickel sulfate per year. It will also build a $2.4 billion plant in Batang Park to produce 220 000 tons of precursors and 42 000 tons of cathodes per year. This will provide the main feedstock for a planned $3.6 billion 200 gigawatt-hour battery plant in the West Java industrial city of Karawang.

LGES and Indonesian state-owned mining company Aneka Tambang signed an agreement to jointly invest in a $300 million nickel mine on the eastern island of Halmahera to produce 16 million tons of nickel ore.

Earlier, South Korean Hyundai Motor Co and LG Energy Solutions agreed to build a $1.1 billion battery plant in Indonesia.

The enterprise is planned to be built by 2023 and will start producing products a year later. It will be located in Karawang, near Jakarta, the capital of Indonesia.