Indonesia has emerged as a global nickel powerhouse, holding over 42 per cent of global reserves.
This rise is attributed to aggressive nurturing of its nickel market, transforming the nation into a major global player.
Nickel production surged from 853,000 tonnes in 2019 to 2.2 million tonnes in 2024, a 158 per cent increase.
Projections estimate annual output to reach over 3 million tonnes by the end of the decade, representing 65 per cent of global supply.
In 2014, Indonesia banned nickel ore exports to boost domestic processing capacity.
This led to the development of an internal processing infrastructure, enabling the country to produce processed materials alongside mined ore.
Exports of nickel derivative products have risen substantially, reaching US$38 to US$40 billion in 2024, up from US$11.9 billion in 2020.
The number of smelters in the country has increased from two in 2016 to over 60.
Much of Indonesia’s nickel production growth has been facilitated by Chinese investment, particularly in facilities like the Indonesia Morowali Industrial Park (IMIP).
Chinese investment in Indonesia’s nickel sector is estimated to be as high as US$30 billion.
However, Indonesia’s flourishing nickel industry raises environmental concerns, specifically related to land use, operational activities, and reliance on coal plants to power smelters.
The Weda Bay Industrial Park (IWIP) and IMIP have significant coal-fired capacity, accounting for 12 per cent of Indonesia’s total coal plant capacity.
Concerns range from degraded water resources to potential impacts on biodiversity and soil fertility.
The Nickel Institute (NI) notes the need for accessible and transparent information on nickel exposure in Indonesian mining regions and its impacts on communities and the environment.
Indonesia has committed to an energy transition, aiming for peak emissions by 2035 and net-zero carbon emissions by 2060.
Nickel miners and industrial parks are exploring options to reduce their environmental footprint, such as constructing wind and solar farms.
Indonesia is focused on capitalising on the energy transition, attracting investments in the electric vehicle (EV) supply chain.
The country’s first battery cell production plant for EVs opened in July 2024, a joint partnership between LG Energy and Hyundai Motor.
The rapid growth in nickel output, combined with a slight slowdown in EV demand, has led to a steep fall in prices, squeezing out competitors and impacting local smelters.
The government is considering cutting production quotas to stabilise prices.
Some analysts predict a cut of 40,000 tonnes, while others suggest authorities may go as low as 150,000 tonnes.
To maintain revenue, the government may increase royalties on mined nickel ore from 10 per cent to between 14 per cent and 19 per cent.
Indonesia’s strategic market position was evident when prices rose to a three-month high, reflecting the impact of potential tightening global supplies.
However, concerns about potentially misleading inventory data from China have been raised.
