Tighter Restrictions on Chinese Nickel Expected Under Incoming Trump Administration

Securing nickel that complies with the Inflation Reduction Act (IRA) requirements is expected to become even more challenging. The US president-elect, Donald Trump, is likely to adopt a zero-tolerance approach to allowing Chinese-owned or operated supplies of raw materials like nickel to qualify for IRA credits.

Washington sources told Fastmarkets that one of the first actions of the new administration will be to use executive rulemaking power to limit the number of electric vehicles (EVs) that qualify for IRA credits. Analysts expect this will be achieved by tightening the rules surrounding the Foreign Entity of Concern (FEOC), making compliance increasingly difficult.

Even under the current regulations, meeting the FEOC requirements has proven challenging. Nearly a year ago, the US Department of Treasury defined a FEOC for the purposes of the IRA as a company with more than 25% ownership or control by entities, including board seats, voting rights, or equity, linked to China, Russia, North Korea, or Iran. As a result, much of the nickel produced in Indonesia, which has a significant Chinese shareholder base, has been deemed ineligible for IRA compliance.

Despite these restrictions, there have been allegations that some nickel has entered the US market falsely claiming to be IRA-compliant. Reports indicate an uptick in activity from industry experts and lobbyists in Washington, with concerns over schemes attempting to bypass FEOC rules.

This expected rule change comes as Western companies continue their partnerships with Chinese corporates in regions like Indonesia. These include ventures such as Ford Motor Company's joint project with Vale and Huayou Cobalt to establish a nickel plant in Indonesia by 2026, as well as General Motors' joint venture with SAIC Motor Corp and Wuling Motors for EV production in the region.

Ford has already faced backlash domestically after announcing plans to use battery cell technology from China’s Contemporary Amperex Technology Co., Limited (CATL) at its upcoming $3.5 billion battery plant in Michigan. Similarly, other ventures involving Chinese firms, like Eramet’s Weda Bay project, which is majority-owned by China’s Tsingshan Holdings, are also drawing scrutiny.

The 45X Advanced Manufacturing Production Credit, which is currently available to US-based entities, is also expected to face restrictions under the revised FEOC rules.

These evolving regulations come at a time when securing IRA-compliant nickel is becoming critical for EV battery production in the US. With global nickel prices stagnating and failing to incentivize new production, existing producers in compliant regions such as Australia and New Caledonia have struggled. Major miners, including BHP, Glencore, Wyloo, First Quantum, and IGO, have faced tough decisions regarding projects as a result of the challenging price environment.

While London Metal Exchange nickel prices have strengthened recently, they remain close to levels seen a decade ago, making it difficult for producers to justify the investments required to scale up production. As the US EV battery manufacturing sector relies heavily on nickel-based batteries, securing non-FEOC material will be crucial moving forward.

Projects favored under the Biden administration, such as Talon Metals' Tamarack project and Eagle Mines' extension project, are likely to attract increased interest from automakers and battery manufacturers seeking to secure compliant supplies. Additionally, projects in other Western nations, including Canada, Brazil, and Australia, are also expected to be in demand.

Fastmarkets estimates that between 2025 and 2027, only 8-9% of global mined nickel production, 4% of intermediate supply, and approximately 12-12.5% of refined supply will likely be IRA-compliant. By 2034, these figures are projected to rise to 10%, 4%, and 13%, respectively, with new projects coming online. However, with a zero-tolerance approach to FEOC materials, meeting supply chain security targets will require significant advancements in exploration, technology, permitting, and financing in the US and allied nations.