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Indonesia’s nickel strategy demonstrates that downstreaming can be more than industrial policy—it can be a development and diplomatic tool, enabling resource holders to capture value at home while fostering cooperation in a fragmented global economy.
In 2023-2024, export bans and licensing sharpened the scramble for critical raw materials (CRMs), pushing them from niche concern to the centre stage of economic and security policy. Governments sought to cut single-point risks, diversify and de-risk supplies, and limit dependence on any single third country. Europe made this shift concrete when the EU’s Critical Raw Materials Act (CRMA) entered into force on 23 May 2024, setting clear targets and compliance pathways to move projects from paper to production. Its 2030 benchmarks are ambitious: mine 10 percent of its demand, process 40 percent, recycle 25 percent, and cap any single third-country supplier share at 65 percent. It also streamlines permits and creates single points of contact, turning de-risking into practical project pipelines.
At the same time, global battery demand climbed to almost 1terawatt-hour in 2024, underscoring why inputs like nickel mattered across industries and regions. Yet the refining remains highly concentrated, especially for nickel, lithium, and cobalt, magnifying shock risks and strengthening the case for additional qualified hubs. China continued to dominate the midstream and downstream electric vehicle (EV) and battery supply chain in 2024, processing between 70 and 95 percent of global lithium, cobalt, phosphate, and graphite. It produced 98 percent of LFP cathode material, two-thirds of nickel-based cathode material, over 90 percent of anode material, and 80 percent of global battery cells. Because China holds especially large shares across multiple refining steps, partners in 2024 need widened efforts to reduce over-reliance.
Indonesia’s nickel-led push offers a practical path to balance growth, build industry at home, and foster cooperation across regions even when geopolitics runs hot. This is not a zero-sum race; it is a chance to share value, set common standards, and lower friction in a tense world.
That is where Indonesia stepped in. By moving beyond raw ore exports and investing in processing and battery capacity at home, it aimed to capture more value onshore. This is why resource-holding economies like Indonesia are increasingly central: processing capacity is scaling on top of large reserves, while joint standards and testing could translate directly into bankable offtake agreements. The goal is not to “replace China,” but to add credible hubs and build value closer to where minerals are mined. This would translate into expanding jobs, reducing transport risks, and lowering geopolitical friction through predictable rules that multiple partners can trust.
The crux is simple: Indonesia’s nickel-led push offers a practical path to balance growth, build industry at home, and foster cooperation across regions even when geopolitics runs hot. This is not a zero-sum race; it is a chance to share value, set common standards, and lower friction in a tense world.
Indonesia sits on some of the world’s largest nickel reserves and is the top producer of mined nickel today. The country first restricted raw ore exports in 2014 to push processing at home, then tightened the ban in 2020 to lock in investment and scale. By 2024, the industrial parks were turning ore into ferronickel, nickel pig iron (NPI), matte, and mixed hydroxide precipitate (MHP) for stainless steel and EV battery supply chains. Much of the early capital came from Asian partners, especially China, but also South Korea and Japan. With output climbing sharply over the past decade, Indonesia has become central to global nickel flows.
Scale is now measured in market share, not just headlines. Indonesia supplies roughly 60 percent of the world’s mined nickel and processes close to 45 percent of primary nickel, widening its lead over the second-largest refiner, China. It has become the world’s second-largest refining base after China, and the fastest-growing. Market value is projected to roughly double by 2030 on the back of expanding production and intermediate outputs.
Indonesia sits on some of the world’s largest nickel reserves and is the top producer of mined nickel today. The country first restricted raw ore exports in 2014 to push processing at home, then tightened the ban in 2020 to lock in investment and scale.
The story has also moved decisively beyond metals into batteries. In July 2024, Hyundai and LG opened Indonesia’s first EV battery cell plant, linking mineral extraction and component manufacturing in one manufacturing place. The broader economy reinforced this shift: investment realisation in 2024 reached about IDR 1,714 trillion, with foreign direct investment accounting for roughly 52.5 percent. Millions of jobs are now tied to these projects, many outside Java, spreading industry to new regions and communities. These moves have deepened local skills, supplier networks, and services around industrial parks, turning downstreaming from a policy gamble into a visible development trend with cross-border significance. This scale makes Indonesia a practical venue for joint standards, testing labs, and bankable offtake agreements.
Yet ownership tells a more complex story. Indonesia’s control over nickel is far smaller than its geological advantage suggests. Despite holding vast reserves and accounting for about 45 percent of global refining, Indonesian firms own only around 10 percent of that refined nickel capacity. In contrast, Chinese companies control roughly 65 percent of Indonesia’s refining capacity, through major players like Tsingshan Group and Jiangsu Delong Nickel, which own large industrial parks such as Morowali Industrial Park (IMIP) and Weda Bay.
However, in 2025, Indonesia proposed amendments to alter its mining law to promote access for companies that build domestic processing facilities, increase eligibility for mining rights, and prioritise domestic use of minerals over raw exports. Separately, the government declared in March 2025 that it plans to switch from a flat-rate royalty system to a progressive one. Royalties for nickel ore would increase from the current 10 percent to 14–19 percent, contingent on benchmark prices set by the government. Additionally, Indonesia issued an order in February 2025 mandating that foreign exchange earnings from minerals and other natural resources remain in the country's domestic banking system for a full year.
Indonesia supplies roughly 60 percent of the world’s mined nickel and processes close to 45 percent of primary nickel, widening its lead over the second-largest refiner, China.
Indonesia’s nickel downstreaming is not only an industrial process, but also a diplomatic strategy. In a fractured global economy where the United States and China pull supply chains in opposite directions, Jakarta has shown that resource holders need not be forced into binary alignments. By using its reserves to attract both Asian and Western investment, Indonesia is positioning itself as a neutral partner and a testing ground for practical cooperation.
This opens a window for South–South collaboration. For example, Indonesia and India share an interest in scaling clean energy inputs and reducing over-dependence on single suppliers. Joint standards for “cleaner nickel,” regional testing labs, or co-financed industrial parks could extend market access beyond traditional North–South channels, anchoring resilience within the Global South itself. Such initiatives fit neatly with the G20’s call for diversified, sustainable supply chains and can link directly to the EU’s CRMA, which creates opportunities for reliable third-country hubs.
But credibility will depend on rules and results. Aligning measurement, reporting, and verification with global buyers, cutting carbon intensity in parks through blended finance and renewable power, and publishing transparent audits can turn Indonesia into a meeting ground rather than a battleground. By balancing Chinese capital with broader partnerships, Jakarta can convert its resource base into geopolitical leverage, proving that resource diplomacy can stabilise, rather than inflame, a polarised world.
Joint standards for “cleaner nickel,” regional testing labs, or co-financed industrial parks could extend market access beyond traditional North–South channels, anchoring resilience within the Global South itself. Such initiatives fit neatly with the G20’s call for diversified, sustainable supply chains.
In the coming years, Indonesia holds real leverage in critical minerals and a clearer path from ore to value-added products. The harder task now is to make these gains broad, clean, and durable. That means portable standards, skills that last, and trade rules that keep markets open. With growth projected at 4.8 percent in 2025–27, the macro runway is there if policy delivers. Cleaner power, stronger local links to spread benefits beyond mine sites, and trusted rules can turn downstreaming from a short-term boom into a sustainable development pathway.
Manini is a Research Assistant with the Centre for Economy and Growth at the Observer Research Foundation.
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Manini is a Research Assistant at the Centre for Economy and Growth, ORF New Delhi. Her research focuses on the intersection of geopolitics with international ...
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