Ford Motor Company’s $4.5 billion deal with PT Vale Indonesia and Zhejiang Huayou Cobalt Company presents an opportunity for the automotive giant to secure an integral part of the Electric Vehicle (EV) battery supply chain and meet nickel demand for the development of their three new EV battery plants in Kentucky, Michigan, and Tennessee.
Ford Motor Company struck a $4.5 billion agreement to develop a nickel processing plant in Kolaka, Southwest Sulawesi, which will be the corporation’s first investment in Indonesia. This blockbuster deal was struck between Ford, PT Vale Indonesia, and Zhejiang Huayou Cobalt Company in March 2023. Ford has not yet disclosed its share of the investment.
According to Ford, the nickel processing plant is projected to produce 120 kilotons of contained nickel per year, in the form of mixed hydroxide precipitate (MHP). MHP is a cost-effective nickel product that can be used in EV batteries. Construction of the processing plant began in early 2023 and is expected to begin production by 2026.
The deal is one of Ford's many efforts to capture a share of the growing electric vehicle (EV) market. On June 14, 2023, Christopher Smith, Ford’s Chief Government Affairs Officer, stated at a conference hosted by the Center for Strategic and International Studies (CSIS), that the company hopes to reach a “run rate of 2 million electric vehicles per year by the end of 2026.” This investment will prove integral to Ford’s EV aspirations, as battery cost accounts for 40% of an EV’s price. Securing this important part of the supply chain will significantly cut production costs.
Ford’s investment in Indonesian nickel comes at an opportune moment for the U.S. automaker, as the Department of Energy issued a $9.2 billion loan to BlueOval SK, a joint venture between Ford and South Korean battery producer SK On Co. in June 2023 for the construction of three EV battery plants in Kentucky, Michigan, and Tennessee.
Smith elaborated, “This [deal] is bolstered by an enormous investment our company is making … We’re building a new battery plant in Kentucky, one in the state of Tennessee, and another one in the state of Michigan.” The loan comes as one of President Biden’s efforts to close the gap between China and the United States in green technologies by subsidizing American companies.
The plants in Kentucky and Tennessee are projected to create 5,000 temporary construction jobs and 7,500 permanent operation jobs. The plant in Michigan is projected to create 2,500 jobs in operation. The Kolaka-based nickel plant is expected to generate 12,000 construction jobs in Indonesia.
The deal comes in the wake of the Indonesian government’s ban on raw nickel exports, leading transnational corporations to ramp up investment in local Indonesian processing plants. Indonesia’s aim is to capture downstream industries involving nickel such as battery and EV production. Smith asserted that the deal would help develop Indonesia’s ambitions: “We’ve got a partnership that’s about the mining and extraction, but also about the processing and refining that all takes place in Indonesia.”
Environmental and Labor Safety Concerns
However, environmental advocates have raised concerns over the environmental repercussions of nickel mining in Indonesia. Indonesia’s nickel reserves significantly overlap with the country’s rainforests. Local farmers have clashed with nickel mining operations due to the removal of large swaths of clove trees that they rely upon for their livelihoods. Furthermore, contaminated runoff soil from mining operations has polluted coastlines, impacting local fishing activity and coral reefs.
Additionally, labor safety concerns have arisen due to the dangerous nature of nickel mining and processing. Protests in Indonesia erupted in January 2021 after two workers at Gunbuster Nickel Industry’s smelting plant on the island of Sulawesi were burned alive due to a plant error.
Smith responded to environmental and labor safety concerns at CSIS by stating that Ford is “creating a very positive partnership with the government of Indonesia in terms of ensuring that we got the types of labor and environmental standards that we need, that fits the values of Ford ...” However, no concrete plans for the Kolaka plant regarding waste management or labor protections have been released.
The Department of Energy’s $9.2 billion loan to Ford has also levied harsh criticisms from American labor unions. United Auto Workers (UAW) union President Shawn Fain lambasted the loan as financing for a project with “no consideration for wages, working conditions, union rights or retirement security,” and asserted that the venture would only create low-paying jobs. Ford responded that it expects the plant to “pay competitive wages and benefits to attract and retain the workforce needed to build high-tech batteries,” and that it will not prohibit labor organizing at the three new plants.
As efforts to decarbonize intensify and the race to capture shares of the EV markets heats up, Ford’s investment in Indonesia presents an opportunity for the corporation to secure an essential part of the EV battery supply chain, create jobs in both the United States and Indonesia, deepen relationships with Indonesian industrial partners, and has the potential to accelerate Indonesia’s capture of downstream battery production. However, important environmental and labor concerns must be considered in the young and rapidly expanding EV industry.
Bea Millan-Windorski is a participant in the Young Professionals Program at the East-West Center in Washington. She is a rising senior at the University of Wisconsin-Madison majoring in History and International Security with certificates in Southeast Asian Studies and Political Science.