The Wall Street Journal Mineral-Rich Developing Nations Demand Bigger Piece of the EV Pie

Their policies are aimed at making the most of the clean-energy shift, but they also create challenges for it.

By Jon Emont, Juan Forero y Alexandra Wexler

Across the developing world, mineral-rich nations say they are moving to end the era of extract and export.  Countries with vast deposits of the ingredients essential to making electric vehicles are digging in and trying to take a bigger share of the expected EV boom.

In parts of Latin America, Africa and Southeast Asia, governments are restricting the export of raw minerals, demanding that miners build processing plants locally and looking to tighten control over foreign- operated mines. The steps are sometimes described as resource nationalism, and their increasing popularity is reshaping supply chains that underpin the shift toward cleaner forms of energy.

Indonesia banned the export of unprocessed nickel, pushing foreign companies to build billion-dollar facilities in the country that are turning ore into higher-value materials for EV batteries. Zimbabwe is trying to do the same with lithium. Leftist leaders in Chile and Mexico are seeking greater state control over their countries’ lithium reserves.

Electric vehicles require six times the mineral inputs of conventional cars, according to the International Energy Agency. The IEA estimated in a 2021 report that mineral demand for use in EVs and battery storage could grow 30 times by 2040.

For developing nations where these resources are dug out of the ground, the clean-energy transition is a big opportunity to juice their economies, said Carole Nakhle, chief executive of Crystol Energy, a London-based energy consulting firm. 

“This will be their bread and butter for years to come,” she said. “They will be hanging on to that sector quite closely, and they will want to squeeze revenues.”

State actions aimed at that goal bring risks for the transition, potentially deterring investment in new mines needed to keep up supply, said Nakhle.

They could also raise the cost of critical materials, increase regulatory burdens for companies and lead to shortages in the future, other economists say.  

“It’s got to be an all-around negative factor for the energy transition,” said Simon Evenett, a professor of international trade and economic development at the University of St. Gallen in Switzerland. Interventionist policies will increase the challenge of sourcing EV minerals, he said.

Others point out that governments everywhere—in rich and developing nations alike—are stepping in to make the most of the shift away from carbon energy. The U.S., for instance, is rolling out billions of dollars in subsidies to nurture clean energy industries and to secure reliable sources of critical minerals at home and abroad. 

“If the advanced economies are going to do it, why wouldn’t we expect developing and middle-income countries to do so as well?” said Cullen Hendrix, a senior fellow at the Peterson Institute for International Economics in Washington, D.C. Ore-rich countries are also looking to move up the value chain instead of simply providing the primary inputs or commodities, Hendrix said. 

Indonesia, a Southeast Asian mineral powerhouse, infuriated trade partners with its 2020 ban on the export of raw nickel, but it worked. Companies from across Asia and the U.S. are pouring investments into building nickel- processing plants in the country, making Indonesia a significant player in the EV supply chain. 

Buoyed by that success, Jakarta in June banned the export of another substance needed for EV batteries: bauxite. Officials say they want smelters to go up across the country. It is too early to tell if that will happen, but for now, the lack of a sufficient number of such facilities is forcing miners to curtail production, mining experts say. 

The policies have caused friction. The European Union in 2021 brought Indonesia before a tribunal at the World Trade Organization, alleging that its nickel-export ban violates trade norms and distorts the price of ore. Indonesia argued that the policy supports local industrialization. It lost the case and has filed an appeal while maintaining the ban.  

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The country is also more vigorously enforcing laws requiring foreign miners to divest. At recent parliamentary hearings, lawmakers cited high demand for nickel and asked that Brazil’s Vale, which controls nickel reserves through its Indonesian entity, be made to reduce its stake so that a majority of the company is in Indonesian hands. Vale, in response to questions from The Wall Street Journal, said it plans to do so.   

The reserves in question will supply a planned new processing facility that drew investment from the U.S. automaker Ford Motor earlier this year.

Other countries are taking similar steps. Mexico banned private lithium mining concessions last year. In February, President Andrés Manuel López Obrador nationalized lithium deposits and handed responsibility for developing them to the country’s energy ministry.

In April, Chile’s leftist president, Gabriel Boric, unveiled a strategy that would give the state greater control over lithium. The South American nation is the leading producer in the so-called Lithium Triangle, where it joins with Bolivia and Argentina, a swath of remote desert and highlands that holds 53% of the world’s lithium resources.

The policy, which needs congressional approval, requires any private company, foreign or local, that wants to exploit lithium to join with the state. 

“This is the best chance that we have to transition to a sustainable and developed economy,” Boric said in a speech. “We don’t have the luxury to waste it.”

Some experts say the policy will likely have the opposite effect. Investors will be put off by the central role given to state mining companies, slowing production, said Juan Carlos Guajardo, executive director of Plusmining, a mining consulting firm in Chile.

“Resource nationalism is spreading around the world, but in Latin America it is quite strong,” said Guajardo.

Though it recently mined a quarter of the world’s supply, Chile is expected to provide about 15% in 2027, according to S&P Global commodity Insights. It is expected to continue losing market share to Argentina and Australia. Argentina is among the countries that have worked to lure investors by offering them favorable terms, in contrast to other countries in the region.

Experts cite Bolivia, which nationalized its lithium deposits in 2008, as a cautionary tale. Evo Morales, who was then president, pledged that instead of simply mining lithium, Bolivia would build electric vehicles and batteries.

Years later, lithium-filled saltwater deposits in the country’s southern highlands have barely been exploited. 

The state lithium company that the government created, Yacimientos de Litio Bolivianos, or YLB, has over recent years spent nearly $1 billion on a factory and other infrastructure but failed to unearth much lithium or make it commercially viable, said Juan Carlos Zuleta, who briefly ran the company. YLB and the Energy Ministry didn’t respond to requests for

In sub-Saharan Africa, governments are working to reap greater financial returns from their mineral wealth. Guinea, a major bauxite producer in West Africa, last year imposed a minimum export price and urged companies to build local refineries. In June, Namibia banned the export of unprocessed lithium and other critical minerals, including cobalt, manganese and graphite.

“What’s generally driving this is fairly basic and straightforward,” said Hendrix of the Peterson Institute. “It’s a desire to capture a larger share of the benefits of the green-energy transition.”

Source: The Wall Street Journal