BASF and Eramet Cancel $2.6B Refinery Plan in Indonesia

BASF SE and Eramet SA Scrap $2.6 Billion Nickel-Cobalt Refinery Plan in Indonesia

BASF SE and Eramet SA have decided to halt their joint venture to build a $2.6 billion nickel-cobalt refinery in Indonesia. This decision is primarily attributed to the decreased demand resulting from the sluggish growth of electric vehicle (EV) sales. The availability of battery-grade nickel has surged globally, leading to a decline in nickel and cobalt prices.

While BASF's shares in Frankfurt remained steady, Eramet's shares in France experienced a slight dip. As a countermeasure, Eramet intends to optimize its existing Indonesian operations to supply nickel ore to local producers. Meanwhile, Indonesia, striving to establish itself as a leading EV supply chain hub, is hosting numerous Chinese-backed projects for the production of battery-grade nickel. China's extensive incentives and surplus battery production have contributed to the decline in prices.

In response to these market changes, BASF is directing its efforts toward bolstering raw material supply for its European operations by establishing a new battery recycling plant in Germany, slated to commence operations later this year. Furthermore, BASF's long-term nickel supply agreement with Russia’s Nornickel for a Finnish battery materials facility continues to face delays due to ongoing permitting issues, resulting in no deliveries thus far.

Key Takeaways

• Key players like BASF SE and Eramet SA have abandoned their $2.6 billion nickel-cobalt refinery project in Indonesia due to the deceleration of EV sales growth.
• The increased global availability of battery-grade nickel has reduced the demand for new refining facilities.
• Eramet plans to optimize its existing Indonesian operations to supply nickel ore to local producers.
• BASF is focusing on a new battery recycling plant in Germany and addressing ongoing supply issues with Nornickel.

Analysis

The cancellation of the nickel-cobalt refinery project by BASF and Eramet reflects the downturn in EV market demand, fueled by excess battery production capacity and reduced sales projections. This shift has immediate repercussions on metal prices and long-term implications for Indonesia's ambition as an EV supply chain hub. BASF's strategic shift toward battery recycling and the unresolved supply issues with Nornickel underscore the industry's adaptation to market realities. Additionally, Eramet's optimization of existing operations signifies a move toward local supply solutions, mitigating the impact of their project cancellation on their operations.

Did You Know?

• BASF SE: A German multinational chemical company and one of the world's largest chemical producers. It operates across various sectors, including chemicals, plastics, performance products, and agricultural solutions.
• Eramet SA: A French multinational mining and metallurgy company that explores, produces, and transforms metals, mainly for the steel industry, including nickel, manganese, and alloys.