We can't say we weren't warned.
August 12, 2023"Musk still mulling massive Tesla plant for Indonesia"
As well he should. Indonesia as both a raw material supplier and value-chain extender is a win for Tesla and a win for Indonesia. Throw in the benefits of a developing market for the end product and Tesla would be foolish to only build the Malaysian plant.
As we've tried to emphasize for the last couple years, resource nationalism is real and the desire of resource-rich countries to be left with something more than a hole in the ground for their efforts is the story of this decade and beyond.....
....Commodity intensity means that inflation will be a nagging problem as the West executes on the above list. Re-arming, re-shoring, re-stocking, and re-wiring need a lot of commodities – it’s a demand shock. It’s a demand shock in a macro environment in which the commodities sector is woefully underinvested –a legacy of a decade of ESG policies. Underinvestment means supply constraints, and geopolitics means even more supply constraints: resource nationalism– see Russia’s stance or Mexico’s recent decision to nationalize lithium mines –means that the supply you think is there to meet the surge in demand isn’t there: prices can thus surge. Executing on the to-do-list can easily drive another commodity super cycle, like the one we had after China joined the WTO in 2000. But that super cycle happened in the context of a peaceful, unipolar world order in which great powers had positive expectations of the future trade environment (see the “theory of trade expectations” above). But that’s not the case anymore.....We visited that communique twice, when it came out in August and again in September 2022's Re-reading Zoltan Pozsar's August 24th Missive, "War and Industrial Policy".
Along the way there have been a half-dozen other recent examples, Serbia with Europe's biggest lithium deposit, Indonesia with their nickel and so on and so on....
And the headline story from The Hill December 22:
Indonesia’s recent decision to maintain its ban on exports of nickel ore despite a ruling by the World Trade Organization that the ban violates its rules is one more illustration of the proliferation of national export restrictions amid increasingly fierce competition for scarce natural resources.
For decades, international trade disputes were almost entirely about restrictions imposed on imports. No more. Today, disputes are just as likely to be about restrictions on exports, especially exports of minerals, metals and other natural resources, such as nickel ore.
Nickel is a vital material in the making of rechargeable batteries, which are needed for the electric vehicles that many believe are key to achieving a carbon-free future for the world.
Indonesia is the world’s largest producer of nickel ore and the home of the world’s largest nickel reserves. The Indonesians, hoping to diversify their developing economy by getting into EV production, have sought to secure more of the value added in nickel processing by imposing the export ban, which has been in place since 2020 and is part of a broader inclination to forbid the export of raw mineral commodities.
In the near term and the narrow view, the nickel export ban may seem to be succeeding for Indonesians. Nearly $14 billion has been invested in increasing the refining capacity of domestic nickel smelters. The value of Indonesia’s nickel-related exports has increased 30-fold.....
....MUCH MORE
We've been pitching Indonesia for a while. The introduction to June 2021's "Indonesia and Coal":
An indigenous battery industry would capture some of the value-added from the country's world-class nickel resource. Elon Musk went to New Caledonia to secure a supply. He should have gone to Indonesia. And maybe built a gigafactory.
- "As Supply Chains Shift, Indonesia Should Get a Serious Look".
- "Tesla Supplier CATL To Invest $6 Billion In Indonesia Battery Project"
- Indonesia’s PT Vale, China Firm Sign $2bn Nickel Plant Deal
- UAE Makes A Big Bet On Indonesia
And very related:
- Copper: "Peru's natural resources:—CIA-linked US ambassador meets with mining and energy ministers to talk 'investments'"
- "Rio Tinto–backed firm InoBat plans to build battery gigafactory in Serbia"....Although
the story of why the deposit has not been mined is complicated (see
links in intro if interested), one thing is certain, these resource-rich
little countries want to be left with something much higher up the
value chain than just a hole in the ground.
