Cancellation of nickel investments should be a wake-up call for Indonesia – The Diplomat

On June 24, two multinational mining and mineral processing giants, France-based Eramet and Germany-based BASF, announced that they would cancel their plans for a $2.6 billion nickel-cobalt refinery located in the Indonesian Weda Bay Industrial Park (IWIP) in North Maluku, Indonesia.

The companies cited commercial reasons, but the Indonesian government would be short-sighted to ignore other concerns. Indirectly referring to environmental and human rights concerns related to nickel processing operations at IWIP, a BASF spokesperson said the company needed a “safe, responsible and sustainable supply of critical raw materials.” The companies’ statements suggest that they are concerned about increasing reputational risk if they invest further in IWIP.

The announcement will be welcomed by communities living near IWIP, whose human rights and environmental concerns are under threat from the growing nickel industry. In January, Climate Rights International released a 124-page report, “Nickel Unearthed: The Human and Climate Costs of Indonesia’s Nickel Industry,” documenting how the massive, multi-billion dollar IWIP industrial complex in North Maluku and nearby nickel mining are violating the rights of local communities, including indigenous peoples, causing significant deforestation, air and water pollution, and emitting massive amounts of greenhouse gases from captive coal-fired power plants, worsening global warming and the climate crisis worldwide. Indonesia is the world’s largest supplier of nickel, and demand for the “critical mineral” has exploded in recent years due to its growing use in electric vehicle batteries.

In 2020, BASF and Eramet announced plans to build a nickel and cobalt refining plant, called Sonic Bay, at IWIP. The project would have produced 67,000 tonnes of nickel and 7,500 tonnes of cobalt per year, using high-pressure acid leaching (HPAL) technology, which uses high temperatures and chemicals to extract nickel from laterite ore.

According to a statement provided by Eramet to Climate Rights International in December 2023, the Sonic Bay project would have had to source its nickel ore from PT Weda Bay Nickel, one of the country’s largest nickel mines, in which Eramet is a minority shareholder. The plant would also have had to rely on IWIP’s coal-fired power plants or diesel generators to power most of the plant’s energy needs until solar panels could be installed on the dry tailings stacks, approximately five years after the project began operations.

Climate Rights International urged Eramet and BASF to wait until all land conflicts between IWIP and local communities at the proposed project site are resolved and community members are fully and fairly compensated for their land before making a final investment decision on the Sonic Bay project. We also called on both companies to ensure that waste from the proposed plant does not add to the massive pollution already caused by IWIP, by establishing their own waste management system to neutralize acid waste and effectively reduce air and water pollution that is already affecting the health of local residents.

While canceling the Sonic Bay project may result in less pollution for local communities, the Indonesian government should do more to minimize the impacts of nickel mining and refining on communities living near IWIP and other nickel industrial parks.

The Indonesian government should now insist that IWIP’s three major shareholders – Chinese companies Tsingshan Holding Group, Huayou Cobalt, and Zhenshi Holding Group – conduct serious investigations to fully identify the harm caused by their operations and engage in good faith mediation with affected communities to provide compensation and end harmful practices. The government should also strengthen laws and regulations to minimize the impacts of nickel mining and refining, including on indigenous communities.

The cancellation of the Sonic Bay project is an opportunity for the Indonesian government and IWIP companies – and the nickel industry in Indonesia in general – to show that they can do two things that should not be in conflict: secure the minerals needed to power the energy transition. And protect human rights and the environment.