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Australian mining billionaire Andrew Forrest has called on China to demand higher environmental standards from its global supply chain, particularly its companies conducting nickel processing in Indonesia, an industry he accused of “complete environmental irresponsibility”.
In an interview with the Financial Times, Forrest — the chair and largest shareholder of Fortescue Metals Group — said electric vehicle manufacturers should be wary of Indonesian nickel, which he said was being extracted at immense cost to the environment.
“China will need to enforce its own environmental standards on its global supply chains,” Forrest said during a visit to Bo’ao, southern China. Every buyer of nickel “needs to be really careful if they’re buying from that [Indonesian] source”, he said.
Forrest, an iron ore billionaire who has long-held ambitions in nickel, shut down mines in Western Australia in January due to a sharp drop in the nickel price, partly driven by supply from Indonesia. He had acquired the assets via his Wyloo company last year.
Indonesia has rapidly become the world’s largest producer of nickel, used in electric car batteries and steelmaking, as it leverages its vast reserves to capture more of the supply chain. Chinese companies have poured in billions of dollars and control the country’s biggest nickel operations.
But Indonesia has faced growing criticism from environmental groups over forestry loss, mining waste pollution and high carbon emissions because of its reliance on coal-fired power. In response, Jakarta has vowed to step up monitoring of environmental standards.
China has improved its domestic environmental policies over the past decade, including through enacting new laws, though the results have been mixed, analysts say. Air pollution is falling in many areas but the number of coal-fired plants has increased and soil and water pollution remain problematic.
The accusations of environmental abuse against Indonesian nickel producers have led global miners, including BHP and Fortescue, to press the London Metal Exchange — where nickel contracts are traded — to provide a “green premium” for sustainable production.
If the LME did not differentiate between “dirty nickel and clean, just because it financially suits them, then in the end there’ll be a consumer backlash”, Forrest said.
The LME has said that while the market cannot yet sustain a separate futures contract, it supported trading in low-carbon nickel on its Metalshub platform. It has also introduced monthly reporting on nickel trading volumes below a particular threshold of carbon emissions.
Daniel Hynes, senior commodities strategist at ANZ Research in Sydney, said a separate contract would be difficult to implement. More likely was that emissions would over time be incorporated into individual producers’ prices.
Government policies such as the EU’s carbon border tax would eventually force producers to account for their emissions, he said.
“I think it’ll be more of a gradual process, where the cost of emissions is essentially built into the cost of producing the metal,” Hynes said.
Australia’s nickel industry in particular has been hit by slumping prices because of an influx of Indonesian supply and stagnant demand for EVs. In addition to Forrest’s Wyloo, miners including IGO and First Quantum have pulled back investment or suspended operations.
BHP said in February it would take a A$5.4bn impairment charge on its Nickel West division and could suspend operations.
Forrest also said oversupply in China’s renewables industry was “fabulous news for the rest of the world”.
China’s trading partners, including the US and EU, are warning of tariffs against Chinese renewable energy products, saying state-directed oversupply is killing their domestic industries.
The EU last week launched two investigations into Chinese solar panel manufacturers that Brussels said have benefited from market-distorting subsidies while US Treasury secretary Janet Yellen has raised oversupply during a visit to China.
“Yes, there’s ebbs and flows. Sometimes they make too little, prices go through the roof, sometimes they make too much, prices fall. But I think the price of renewable energy is in a long-term downtrend, led by China. And that is great for commodities,” Forrest said.
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