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Indonesia aims to dominate the world’s nickel supply, and it’s succeeding. The country has gone from having two nickel smelters to 27 over the last 10 years, with 22 more planned, according to S&P Global Commodity Insights. Last year, the country was responsible for more than half the supply of nickel ore globally. The metal was once known mainly for making stainless steel; now demand has skyrocketed as automakers like Tesla need it for electric vehicle batteries and companies that make larger batteries need it for clean electricity projects.
Forests disappear
But where developers build out these vast nickel-processing plants, surrounding forest disappears twice as fast, according to a new analysis by the Indonesian non-profit organization Auriga.
Indonesia has the largest reserves of nickel in the world. Until recently, it mostly sold its nickel deposits—ore— raw. It didn’t have the processing plants to refine the metal.
Then 10 years ago, Indonesian officials decided the country should stop selling its resources so cheaply and instead refine them, to provide employment and fetch higher prices. A massive nickel buildout ensued. President Joko Widodo has bolstered this, co-locating nickel smelters with EV battery factories.
In addition to the new smelters, coal power plants have sprung up to serve the miles of new industrial parks. Surrounding villages can see the well-lit nickel works while they live through regular power outages.
Indonesia’s nickel ore lies in shallow deposits, easily accessible when the rainforest is cut down.
Rising deforestation
The new analysis of rainforest loss, based on government data, shows deforestation rose from an average of 33 square kilometers (about 13 square miles) around each smelter, to 63 square kilometers (about 24.5 square miles). If all 22 new plants are built, deforestation is likely to increase dramatically.
“The damage to the environment is devastating,” said Timer Manurung, chairman of Auriga. “Deforestation has significantly increased … rivers are polluted, mangroves are cut to develop smelter areas, coastal areas and coral are being damaged by the smelters.”
The waste from coal power plants was another problem, he said.
A vast tropical archipelago, Indonesia is the world’s third most rainforest-covered country, home to giant forest flowers and endangered orangutans and elephants.
Since 1950, more than 740,000 square kilometers (more than 285,000 square miles) of Indonesian rainforest—an area twice the size of Germany—have been logged, burned or degraded, according to Global Forest Watch.
PT Indonesia Weda Bay officials declined to be interviewed by the AP but the company said in statement it has planted more than 10 square kilometers (about 4 square miles) of new trees. The company plays an active role in supporting the living standards of local people, offering economic development, it said, and the industrial zone meets all environmental standards. The company said it strives to protect water and has launched coral and mangrove planting programs.
Complaints from villagers at the Weda Bay project mirror those from communities near other smelter works across Indonesia, including a controversial industrial park on the island of Borneo and other projects in North Maluku.
Perhaps related to these complaints, the interest of some European companies in nickel from Indonesia may be cooling.
In recent weeks, the French mining company Eramet and German chemical giant BASF announced they were cancelling plans to build a $2.6 billion nickel refinery. Eramet cited no reason, while BASF blamed changes in the global nickel market.
The announcements came shortly after being contacted by the Associated Press for this story.
Indonesia has been wooing Tesla, which uses twice as much metal in its total production of batteries than the next highest auto competitor.
The amount of nickel that the company used in 2023 was up a third over the year before. Only 13% came from Indonesia last year, but its 2023 impact report mentioned Indonesia 18 times and warned the country’s nickel will be crucial.
No response
Tesla did not respond to emailed questions asking about its use of nickel from Indonesia and deforestation.
Questions to Indonesia’s Ministry of Environment and Forestry, Coordinating Ministry of Maritime and Investment Affairs and Ministry of Energy and Natural Resources went unanswered.
Nickel-making doesn’t have to be dirty. Using clean energy rather than coal goes a long way toward cleaning the air near nickel complexes. The cleanest operations produce emissions vastly below the industry average, according to a report by the non-profit Transport and Environment last year. Automakers could do more to investigate where their nickel comes from, including using satellites, and ban nickel from deforested areas.
