Indonesia proposes 'limited' mineral FTA with US

Imports and Exports | | MIC Customs Solutions |

Indonesia is keen to agree a limited trade deal with the US focusing on minerals in order to boost its companies in the electric vehicle battery supply chain.

Indonesia is set to put forward proposals for a limited free trade agreement (FTA) with the US focusing on minerals in order to benefit from new subsidies for the electric vehicle (EV) supply chain.

Government minister Luhut Pandjaitan told a news conference that it would seek to ease restrictions on the exports of materials critical for the production of EV batteries, in particular nickel. Raw nickel ore has been under an export ban in Indonesia since 2020, which has led many companies to invest in refining facilities in the country.

A deal on such exports would help Indonesian companies benefit from provisions in the US' Inflation Reduction Act, which offers consumers subsidies for the purchase of electric vehicles containing materials from the US or its free trade partners.

Mr Pandjaitan said: "We do not have an FTA with [the US]. Now we're proposing a limited FTA with them."

His deputy, Septian Hario Seto, added: "It's the same in essence, that for critical minerals there will be free trade with requirements on processing, such as for nickel, aluminum, cobalt [and] copper."

In March, the US signed a similar limited trade deal with Japan for EV battery materials, with lithium, nickel, cobalt, graphite and manganese among the products included.

Mr Pandjaitan will be heading to the US next week for further discussions on the proposal, where he is also set to meet representatives from key EV makers Ford and Tesla to try and attract more investment in the country's nickel processing sector.

Reuters noted that last month, Ford signed an agreement with an Indonesian arm of Brazilian nickel miner Vale and China's Zhejiang Huayou Cobalt for the construction of a  $4.5 billion processing plant in Sulawesi.