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What Elon Musk is looking for in Indonesia and why it’s so important to Tesla

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Manish Saini
Manish works as a Journalist and writer at Revyuh.com. He has studied Political Science and graduated from Delhi University. He is a Political engineer, fascinated by politics, and traditional businesses. He is also attached to many NGO's in the country and helping poor children to get the basic education. Email: Manish (at) revyuh (dot) com

While Elon Musk promised to sign a “giant contract” with the miner who supplies low-cost nickel to Tesla, minimizing the impact on the environment, the methods used in that industry to dispose of the waste can make the deal difficult to close.

As Tesla expands by opening its factories in China and Germany, its billionaire owner runs the risk of becoming increasingly dependent on Indonesia. This Asian country is the largest supplier of nickel used in the production of batteries for its cars.

Indonesian miners have been harshly criticized for their plans to dispose of waste offshore. That means Musk and other manufacturers may have to bypass sourcing rules as they try to force the industry to change its traditional strategies and adopt ones that are greener.

“Nickel projects being built in Southeast Asia will rely on coal, fuel oil or diesel to run their operations and will leave a very large carbon footprint,” says Sam Riggall, CEO of Clean TeQ Holdings.

“This sort of makes a bit of a mockery of driving a green, sustainable car,” said the expert.

What joke are we talking about?

By 2040, electric vehicles will account for 58% of global car sales and 10% in 2025, BloombergNEF analysts calculated.

Nickel is a key metal that helps accumulate more energy in batteries that cost less and are smaller. For this reason, electric cars that use them charge faster and cover a greater distance before running out of power.

Indonesia owns nearly a quarter of all nickel reserves in the world. To meet the demand of electric car manufacturers, companies in this country are investing in projects that will use acid to process low nickel ores and produce high-quality chemicals for batteries.

In turn, a large spill that occurred in 2019 as a result of the rupture of a pipe in a mine built in Papua New Guinea demonstrated the damage that this process can cause to the environment.

“The disposed tailings will have a drastic, non-reversible impact on the ecosystems, marine life and humankind,” warned Alex Mojon, president of the Swiss Association for Quality and Environmental Management in a report on the accident, cited by Bloomberg.

In turn, Simon Moores, founder and CEO of the consulting firm Benchmark Minerals, stressed that the methods used by Indonesian miners to dispose of by-products place them on the same blacklist as the illegal artisanal cobalt from the Democratic Republic of the Congo due to human rights concerns.

Several analysts, including Jim Lennon, a senior consultant at investment bank Macquarie Securities, believe that large companies are unlikely to sign new contracts for nickel projects while prices remain low.

While miners new to the business such as Canadian companies Giga Metals and Canada Nickel are boasting green credentials and their share prices are rising, it is unlikely that they will be able to produce enough clean nickel for companies like Tesla, thus putting pressure on the big boys in the mining industry.

“The industry is focused on these issues because the shareholders, the institutional investors are very much focused on it,” Lennon concluded.

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