A consortium including China’s largest battery company, CATL, and materials supplier GEM Co will invest $700m to produce nickel for electric car batteries in Indonesia, in the latest sign of growing demand for the metal.

The plant on the island of Sulawesi aims to produce 50,000 tonnes a year of battery-grade nickel for electric cars, Shenzhen-listed GEM said in a statement.

Rising sales of electric cars have prompted growing demand for nickel, a metal mostly used to make stainless steel. Some of the world’s largest mining companies, from Glencore to BHP Billiton, are positioning themselves to supply the industry.

GEM, which is a major supplier of materials to the battery industry, said there could be a shortage of nickel after 2020 due to rising sales of electric cars.

“The strategic security of nickel resources has become the shared concern of the industry,” it said.

The consortium, which also includes Japan’s Hanwa Group, Indonesia’s PT Bintangdelapan Group, and Chinese stainless steel producer Tsingshan, will form a new company to build the project on the Morowali industrial park.

Originally launched by Tsingshan, the industrial park is part of China’s Belt and Road Initiative and is supported by the state-owned China Development Bank. It comes as part of Indonesia’s strategy to build a domestic smelting industry as opposed to simply exporting raw materials.

The venture will also be able to produce 20,000 tonnes of battery grade cobalt sulphate, another battery metal mined along with nickel, as well as manganese sulphate and other battery materials.

The raw nickel will be supplied from Tsingshan’s mines in Indonesia for 10 years, the companies said. Tsingshan has over 12m tonnes of reserves in the country, it said.

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