Strengthening the supply chain for electric vehicles

INDONESIA - Report 30 Jun 2022 by Cyrillus Harinowo

Lucky Goldstar, a Korean company, through its subsidiary LG Energy Solution, recently broke ground to build new battery materials plants in Batang Industrial Park, Central Java, Indonesia. Of the six stages in making EV batteries, the plant in Batang will comprise three of those stages. It will have Phase 2, which is the refinery; Phase 3, which is the precursor plant; and Phase 4, which is a cathode materials factory. The plants will rely for their supply of raw materials on the HPAL (High Pressure Acid Leaching) smelter in Halmahera, North Moluccas Province.

The completion of these plants will integrate the whole supply chain for the EV industry in Indonesia, from the processing of the nickel ore, which also contains cobalt ore, located in Halmahera, continuing with the plants in Batang for refining, to the production of cathode materials, and the completion into battery cells, modules and packs, located in Karawang, West Java. These batteries will be attached to the EVs produced in Cikarang by Hyundai Motor. What is greatly missed from the whole story is that the capacity of the final end of the batteries, which are battery cells, modules and packs, in Karawang, West Java, was only 10 GWh, while the plants' capacity in Batang was set at 200 GWh. The question is - where will the rest be used?

The Central Board of Statistics in Indonesia released its balance of trade report for May 2022. The trade balance registered another large surplus even though it was significantly lower than in April. The May surplus was $2,895.2 million compared to the $7,564.9 million achieved in April. The total trade surplus for the first five months of 2022 stands at $19,792.2 million, 88.4% higher than the $10,506.4 million achieved in the same period of the previous year.

Exports in May reached $21.505.4 million while imports were $18,610.2 million. Cumulative exports for the Jan-May 2022 period reached $114,971.8 million while cumulative imports were $95,179.6 million. The trade balance showed that the level of exports in May shrunk somewhat after expanding significantly in April. One of the main factors for the decline in exports and in the trade surplus in May was the ban on CPO exports set by the Indonesian government. However, the ban was recently reversed.

The Central Board of Statistics also reported the Consumer Price Index for May 2022, which showed inflation of 0.40%. With that monthly inflation, year-over-year inflation reached 3.55%, a level at the higher part of the target inflation corridor. While remaining vigilant, the Indonesian Central Bank kept its benchmark interest rate constant at 3.50% at its Monetary Policy Meeting in June 2022 at the time as the US Federal Reserve boosted its own interest rate.

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