Indonesia gets ‘wake-up call’ to step up sustainability efforts in nickel industry

In a rare admission, Indonesia’s government acknowledged on Friday the need to address sustainability in its nickel industry after German chemical giant BASF and French miner Eramet cancelled a US$2.6 billion nickel-cobalt refining complex project in the mineral-rich country.

The termination comes amid falling prices of nickel and a campaign by non-government organisations who say the project in North Maluku province risked destroying rainforest inhabited by indigenous people.

“BASF’s decision to withdraw its US$2.6 billion investment in the Sonic Bay project in Halmahera is quite unfortunate,” Nizhar Marizi, director of energy, mineral resources and mining at the Ministry of National Development Planning (Bappenas), told This Week In Asia.

“However, the cancellation serves as a wake-up call to address underlying issues in the investment climate, especially in the sustainability aspect of nickel commodities,” Nizhar said.

“It also prompts us to review the overall governance of our downstream industries, namely enhancing the regulatory framework, improving the ease of doing business and offering more attractive incentives to international companies.”

By addressing those challenges, Indonesia could attract a broader range of global investors, he said.

The project, known as Sonic Bay, had aimed to refine nickel and cobalt from the Weda Bay nickel mine on the island of Halmahera in Indonesia’s eastern province of North Maluku. Eramet has a minority stake in the Weda Bay mine.

The cancelled venture has also dealt a blow to the country’s efforts to broaden investments beyond China in the nickel industry where Chinese companies have built more than 90 per cent of Indonesia’s nickel smelters.

“This is a major blow to Indonesia’s