(Yicai) Sept. 25 -- GEM, the largest supplier of battery raw materials in China and the country's leading battery recycler, will invest about USD750 million in two new plants in Indonesia in a move aimed at developing global industrial supply chains in alignment with the provisions of the US Inflation Reduction Act.

The first plant, with a total investment of USD600 million, will be built in the PT Indonesia Morowali Industrial Park and will process laterite nickel ore into compounds with a nickel content of 30,000 tons annually, the Shenzhen-based firm said today. The plant will be built in two phases, with the first going into operation next year and the second by the end of 2025.

The project will be built and operated jointly by GEM and PT Merdeka Battery Materials, a listed Indonesian firm that owns local mineral resources. A newly formed unit of PT Merdeka Battery Materials will have a 55 percent stake in the joint venture plant and will be responsible for the supply of nickel ores for the JV, while two units of GEM will own the rest.

GEM’s lithium battery materials JV plant in South Korea will have the priority to buy 80 percent of the output from the Indonesian laterite nickel ore plant, where it will be further processed to make battery ternary precursor material, the company noted, adding that most of the final products will be sold in the European and North American markets.

The project aims to create a new global supply chain for battery materials based on mining and preliminary processing in Indonesia and further processing in Korea, while satisfying end-users in Europe and the United States and meeting the requirements of the US Inflation Reduction Act, such as the location and the shareholding structure of the JV plants, GEM pointed out.

GEM said in March that it had agreed with South Korean power battery maker SK On and lithium battery cathode precursor maker EcoPro Materials to invest USD931 million together building a local plant to turn out cathode precursors and raw materials for European and US clients and meet the IRA’s provisions. 

The company also said today that one of its holding subsidiaries plans to set up another project firm to invest about CNY1.1 billion (USD150 million) building a facility to produce ternary precursor materials for lithium batteries in the same Indonesian industrial park, with annual capacity of 30,000 tons of high-nickel ternary precursors.

Construction work on the project is expected to start next month and be completed and kick off operations in October 2025, GEM added.

The ternary precursor plant will help the host nation boost its capability in nickel minerals processing by extending the business downstream, while at the same time making GEM’s battery material production assets in the southeast Asian country more complete and better able to serve European and US battery producers, the firm said.

GEM’s shares [SHE: 002340] closed 0.7 percent lower at CNY6.14 (84 US cents) in Shenzhen today. The stock is down about 17 percent since the end of last year.

Editor: Futura Costaglione