According to Financial Times,
Nickel companies are driving a record year for public listings in Indonesia, in a crucial test of investor enthusiasm for President Joko Widodo’s ambition to make the country a top participant in the global electric car market.
Indonesia “holds the world’s largest nickel reserves – a key metal used in batteries – and is the biggest producer of the commodity.” The President “banned the export of raw nickel to encourage more battery makers to build domestic factories to process it… Now the public listings of nickel companies are set to test foreign institutional investor interest in Widodo’s vision, despite Indonesia still being seen as a fragile emerging market with volatile equities.”
The country is mineral-rich. Tin is one of Indonesia’s main global exports, along with other metals necessary for growing EV and decarbonization markets. But as the article points out:
“It is not only nickel producers heading for the [IPO] market. Amman Mineral International, Indonesia’s second-largest copper and gold miner, is planning an IPO of up to $1bn in the first half, according to a person familiar with its plans. Copper is another essential material in electric vehicles.”
Widodo’s nationalistic vision for his country’s industry is not the only thing investors may find challenging. Indonesia’s mining sector is known for a persistent absence of environmental and human rights controls even in formalized mining. Years of industry efforts to improve mining practices in Indonesia conflicted with cultural norms and economic realities and have seen limited success. The outlook for meaningful change in the future is unfortunately not optimistic.
What This Means
Due to Indonesia’s importance in global mineral production, the country’s increased growth has several implications for the broad market. Two of the most complicated matters are:
- Potential IPO investors who have ESG guidelines will be challenged by having to balance fundamental investment economics and climate sensitivities/decarbonization of their investment portfolios with political stability concerns and social/human rights impacts of opportunities.
- As more investors jump in, manufacturers will see increased volumes of Indonesian raw materials and batteries. Corporate procurement are sure to face choices balancing pricing, availability and corporate responsible supply chain commitments.
You know what Kermit the Frog said: “It ain’t easy being green.”