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Business News/ News / Tsingshan Unit Plans Indonesian Battery Plant as Trade Frictions Mount
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Tsingshan Unit Plans Indonesian Battery Plant as Trade Frictions Mount

The battery unit of Tsingshan Holding Group Co., the world’s top nickel producer, plans to build a plant in Indonesia, the latest in a series of Chinese investments that will help the Southeast Asian nation step up from commodities production to more lucrative processing and manufacturing.

Tsingshan Unit Plans Indonesian Battery Plant as Trade Frictions MountPremium
Tsingshan Unit Plans Indonesian Battery Plant as Trade Frictions Mount

(Bloomberg) -- The battery unit of Tsingshan Holding Group Co., the world’s top nickel producer, plans to build a plant in Indonesia, the latest in a series of Chinese investments that will help the Southeast Asian nation step up from commodities production to more lucrative processing and manufacturing.  

REPT BATTERO Energy Co.’s first overseas battery factory will be housed alongside Tsingshan’s existing operations in Weda Bay and could begin operating as soon as next year. The intention is to steal a march on rivals planning new capacity elsewhere in the world, and take advantage of its parent for raw materials and infrastructure. Locating in Indonesia could also head off concerns over trade frictions that threaten to disrupt exports from China. 

“Many battery manufacturers are building factories and ramping up in Europe and North America, but we expect their capacity will only operate from around 2026 or after," Jason Hong, US general manager of REPT, said in an interview. “We want to get ahead of them with the factory in Indonesia."

China is one of Indonesia’s top investors, spending more than $7 billion there last year, with much of the cash deployed on building out processing facilities for the nation’s abundant reserves of raw materials. Jakarta has ambitions to develop as a hub for electric vehicles, a sector in which China leads in terms of sales. Indonesia is the world’s biggest miner of nickel and No. 2 for cobalt, ingredients crucial to the production of EV batteries.

REPT began by selling batteries for energy storage systems, but has since expanded to carmakers including Stellantis NV, Li Auto Inc. and SAIC Motor Corp. It ranked as China’s No. 9 in terms of EV battery installations in the first two months of 2024, up from No. 11 last year, according to China Automotive Battery Innovation Alliance.

New Listing

The company listed in Hong Kong in December, at a time when EV sales growth has slowed after a period of rapid expansion. REPT warned last month that its net loss in 2023 could be as much as 2 billion yuan ($277 million), or four times worse than the previous year, due to lower prices, delayed payments from customers and the costs of expansion.

China’s dominance in EVs and the processing of many critical minerals has drawn scrutiny from trade officials in the US and European Union. Hong said policy uncertainty is potentially an issue for the company, and putting a factory in Indonesia could help mitigate the threat.

The US is keen to develop supply chains that don’t rely on China, while Jakarta is lobbying for closer trade ties with Washington to ensure its exports can benefit from the green subsidies available in the Biden administration’s Inflation Reduction Act. The two countries are also partners in a landmark climate finance pact.

“Labor and power costs in Indonesia are similar to China," said Hong. “Tsingshan has comprehensive infrastructure built, and its extensive experience in the country would help with budget estimates," he said. “We also have a good relationship with the Indonesian government, which is supportive of new energy sectors."

Still, Indonesia isn’t without risks. For one, the nation’s power supply is heavily reliant on coal, the dirtiest fossil fuel, which could raise environmental concerns among buyers and investors. A deadly explosion at a Tsingshan nickel plant in January has also unnerved some of REPT’s customers.

“We did have clients concerned about how we can prevent this from happening again," Hong said. “They are attaching great importance to this matter."

On the Wire

China is taking its dispute with the US over electric-vehicle subsidies to the World Trade Organization, challenging elements of President Joe Biden’s signature climate law passed in 2022.

A Canadian watchdog is calling for penalties against Dynasty Gold Corp. after it concluded the company used forced labor at its Chinese mine, which the miner denies. 

China’s $1.3 billion port in Peru is facing a surprise challenge that could upend its business model, just months before its inauguration later this year. 

While much of the rest of the world tries to build more renewables, China is figuring out how best to make use of an abundance of them.

The Week’s Diary

(All times Beijing unless noted.)

Wednesday, March 27:

Thursday, March 28:

Friday, March 29:

Saturday, March 30

Sunday, March 31

More stories like this are available on bloomberg.com

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Published: 27 Mar 2024, 05:05 AM IST
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