From 379 Million to 250 Million, the Story Behind Indonesia's Nickel Ore Policy Shift

Editor's note: Since the beginning of this year, Indonesia has tightened its nickel mining policies. Behind this move lies the Indonesian government's response to the previously persistent depression of international nickel prices, Jakarta’s concerns about sustainable resource exploitation, and Indonesia’s ambition to transform its industries from raw material exports to high value-added processing. As the world's largest nickel producer, Indonesia's policy adjustments have a profound impact on the global industrial chain. While Indonesia's protection of its national interests is understandable, these measures have also affected both domestic and foreign-invested companies, including Chinese firms. Some commentators suggest that Indonesia needs to strike a balance between safeguarding its national resource interests and embracing industrial cooperation.

"Striving to transform from simply selling resources to being able to set prices, collect taxes, and lead in rule-making"

"Several production lines in South Sulawesi and Central Sulawesi… have basically cut output to below 50%." On June 5, Arief, chairman of the Indonesian Nickel Industry Forum, revealed this data at a key minerals conference in the country. He said that due to the government’s reduction of nickel mining quotas, the capacity utilization rate of the country's rotary kiln electric furnace smelting plants has dropped from 84% last year to 76%. The vast majority of Indonesia's nickel mining is concentrated on Sulawesi Island, where many small villages have developed into nickel mining and processing hubs. The decline in local plant capacity utilization is a microcosm of how Indonesia’s nickel mining policy is affecting the industry.

According to Indonesian state news agency Antara, Reuters and other media, the Indonesian government announced last December that it would strictly regulate nickel production. Since the start of this year, Indonesia has implemented a number of supply-side restrictions in the nickel industry, including cutting the 2026 nickel mining quota from last year’s 379 million tons to 250 million tons, a year-on-year decrease of 34%; changing the review cycle for the nickel mining RKAB (Work Program and Budget) from once every three years to once a year; substantially increasing the correction coefficient of the benchmark price for nickel ore from 17% to 30%, and introducing new taxes on associated cobalt, iron, and chromium metals. In addition, the Indonesian government stipulated that from September 1 this year, exports of key bulk commodities must go through state-owned Danantara Resources Company as the sole channel. This rule is expected to impact Indonesia's nickel product exports.

Indonesia is the world’s largest nickel producer, accounting for about two-thirds of the total global output. Indonesia’s nickel reserves account for about 42% to 45% of the world’s total. According to The Jakarta Post, the country’s Minister of Energy and Mineral Resources, Tasrif, said Indonesia’s total nickel ore reserves are 22.3 billion tons, with proven reserves of 5.3 billion tons and estimated reserves of 17 billion tons. The U.S.-based site The Diplomat introduced that Indonesia’s nickel ore is mainly used to produce two types of products: nickel pig iron and ferronickel for stainless steel production, and mixed hydroxide precipitate (MHP) for electric vehicle batteries. Nickel pig iron and ferronickel make up nearly 80% of Indonesia's nickel processing products, while MHP accounts for less than 20%.

Regarding Indonesia's nickel mining control policies, Septian, a member of the National Economic Committee, said the oversupply in recent years has put continuous pressure on nickel prices, so controlling production quotas is necessary, “if we do not control output, I think in 2026 Indonesia will create the largest surplus in nickel market history.” This concern is not groundless—over the past four years, international nickel prices have plunged from $30,000 per ton to below $18,000 per ton, reaching as low as $14,200 per ton at the end of last year.

In addition to price factors, resource sustainability is also an important reason for Indonesia’s tighter nickel mining policies. Pan Yue, deputy director of the Indonesian Studies Center at Jinan University, told Global Times that Jakarta's assessment suggests that, at a mining pace of 300 million tons a year, the country's nickel mines could be exhausted in less than 20 years. For a country that regards the nickel industry as a long-term economic pillar, this number is not optimistic; therefore, slowing down mining is also leaving room for the future.

Industrial upgrading is also a core reason for Indonesia’s restrictions on nickel mining. Indonesia is vigorously promoting the industrial “downstreaming” of mineral resources. In 2009, Indonesia enacted a law requiring mineral resources to be processed domestically and to add value before export, marking the beginning of its “downstreaming” strategy. In 2014, Indonesia for the first time implemented a raw mineral export ban. In 2020, the ban on nickel ore exports came into effect, requiring exporters to build processing plants in Indonesia to boost the industry's added value and global competitiveness, pushing Indonesia to shift from a simple resource exporter to a resource processor. According to The Economist, Indonesia hopes to build a complete electric vehicle industry chain domestically. Though this goal is challenging, Luhut, chairman of Indonesia’s National Economic and Industry Committee, believes the country could become one of the world’s top three electric vehicle and battery producers by 2027.

Pan Yue noted that Indonesia’s logic is similar to Chile’s adjustment of lithium policy and Congo (DRC)’s renegotiation of cobalt agreements—once resource-rich countries reach a mature stage in their industries, they aim to transform from merely selling resources to being the party able to set prices, collect taxes, and dictate the rules.

"Chinese investment supported the expansion of Indonesia's nickel processing capacity"

"Please mine more nickel!" In 2020, Elon Musk, the American entrepreneur and CEO of Tesla, called on the global mining sector. At the time, he feared soaring demand for electric vehicle batteries would lead to raw material shortages. Reuters pointed out that Indonesia responded actively. The country’s nickel ore output surged from 780,000 tons in 2020 to 2.3 million tons in 2024, and its share in the global nickel ore supply jumped from 30% to about 70% during the same period.

International media and industry circles generally believe that Chinese investment and technology contributed to the rapid rise of Indonesia's nickel mining industry. According to Reuters, China financed and built Indonesia’s nickel sector, making the country the world’s top nickel producer in just a decade. A Goldman Sachs report released in February this year bluntly stated that over the years, “Chinese investment supported the expansion of Indonesia’s nickel processing capacity,” further strengthening Jakarta’s influence on the international market. The Lowy Institute in Australia also noted that China is Indonesia’s main investor and consumer of nickel ore.

Indonesia and China’s deep cooperation in the nickel industry has strongly promoted Indonesia’s economic development. According to data published by the Center for Strategic and International Studies (US), from 2020 to 2024, Indonesia's economy achieved substantial growth.

A previous article in The Jakarta Post stated that whoever controls the production, processing, and trade of key minerals will shape the economic landscape of the 21st century, and Indonesia is at the heart of this transformation. There is also an opinion that Indonesia’s geopolitical status has been enhanced due to its possession of key resources like nickel.

A 2023 New York Times report showed that Chinese investment created a large number of local jobs in Indonesia. The article said that before Chinese investment, many people on Sulawesi lived by fishing and farming. Jamal, a local resident nearing 60, was used to scarcity and extremely limited job opportunities, often riding half an hour by motorcycle to work at construction sites in Kendari. After the Chinese company built a smelter locally, Jamal’s son-in-law was hired, Jamal himself found work building dormitories for migrant workers, and he built seven rental units on his own land, significantly increasing his income.

"Policy changes have affected almost all foreign participants"

The tightening of Indonesia’s nickel mining policies has had an impact on the international supply chain and many enterprises. According to a June report from the Forbes website, the International Nickel Study Group projects that last year’s surplus of about 280,000 tons on the international market will shift to a 32,000-ton shortfall this year.

Hong Kong's Asia Times noted that policy changes in Indonesia have affected almost all foreign participants. Reuters, Nikkei Asia and other media cited examples such as France’s Eramet-backed PT Weda Bay Nickel halting production after depleting its mining quota at the end of May. Japan's Sumitomo Metal Mining’s smelting project faces lengthy approval processes, and JETRO has repeatedly voiced concerns over Indonesia's policy environment. Korea’s LG Energy Solution's nickel downstream business is hampered by quota cuts. Singaporean investors, especially those active in resource and energy sectors, are coping with stricter Indonesian cross-border foreign exchange regulations, resulting in long delays in profit repatriation.

Chinese enterprises are also affected. Confronted with sharply rising overall production costs, major Chinese nickel producers such as Tsingshan Group and Huayou Cobalt began adjusting their operations in early May, with some firms moving to cut output. An industry veteran researching Indonesia's nickel sector told Global Times' Indonesia correspondent that the online claims about "large Chinese companies moving out their equipment overnight" are fake news, but indeed some smaller companies have begun to cut production or even go bankrupt.

Multiple outlets report that the Chinese Chamber of Commerce in Indonesia has written to President Prabowo, asserting that Chinese companies are important participants and promoters of Sino-Indonesian trade cooperation and remain optimistic about Indonesia’s development potential. However, existing issues in the nickel industry have driven up overall costs by two-fold, increased operational losses for enterprises, and impacted the livelihoods of more than 400,000 people along the industrial chain.

Some opinions point out that certain Indonesian nickel industry policies have brought negative impacts on the country, such as policy instability shaking long-term market confidence in Indonesia. Weaker investor enthusiasm is already reflected in the rupiah—since early 2026, the rupiah has significantly depreciated against the US dollar. In March 2026, Fitch Ratings downgraded Indonesia’s sovereign credit outlook from stable to negative, citing reduced policy credibility and increased uncertainty.

The veteran expert mentioned above further notes that there is indeed some nickel demand in the steel sector, but its importance in the electric vehicle battery industry is gradually declining. This view is corroborated by reports from other media. Reuters mentions that many electric car manufacturers are gradually switching their R&D toward nickel-free batteries. Asia Times explains that high-nickel ternary batteries, once mainstream, are now steadily being replaced by lithium iron phosphate batteries without nickel or cobalt. Moreover, many electric car manufacturers have launched mass production of sodium-ion batteries that do not contain lithium, nickel, or cobalt, further weakening nickel’s strategic importance. “Indonesia must balance between safeguarding national resource interests and embracing industrial cooperation,” Asia Times wrote.

"It remains to be seen how Indonesia’s follow-up policies will unfold"

Facing concerns from foreign businesses, the local Indonesian chamber of commerce and the government have responded. A senior member of the Indonesian Entrepreneurs Association said foreign companies’ complaints are understandable, as even local business circles have repeatedly raised such issues formally to the government departments. The chairman of the Indonesian Chamber of Commerce and Industry, Arsjad, recently stated that he has taken note of the Chinese Chamber of Commerce’s letter and welcomes Chinese enterprises to visit for dialogue and discuss solutions from the corporate perspective.

At the government level, on May 13 President Prabowo publicly acknowledged certain problems within the nickel mining industry. Luhut recently told the South China Morning Post that Prabowo is about to meet with representatives of around 20 Chinese companies investing in Indonesia. On July 18, Indonesia’s Coordinating Minister for Economic Affairs, Airlangga, who attended the World Artificial Intelligence Conference in China, said Indonesia highly appreciates the contributions of Chinese companies to Indonesia's supply chain construction and technological progress, and will create a favorable business environment for enterprises from China and elsewhere to invest and operate in Indonesia.

In terms of policy, on July 10, the Indonesian Ministry of Energy and Mineral Resources announced that it would not universally raise the national nickel mining quota, but would add quotas for domestic smelters facing raw material shortages on a case-by-case and extremely strict basis.

The aforementioned industry expert researching Indonesia’s nickel sector said that the direction of Indonesia’s future policies remains to be seen. He believes the government may make adjustments based on market conditions going forward.