Dr. Sameer Kumar – Indonesia sits atop the world's biggest nickel reserves – a metal essential for electric vehicle (EV) batteries and the renewable energy transition. In recent years, Jakarta has boldly wielded its resource might by banning exports of raw nickel ore to force global companies to invest in domestic processing.

This "nickel nationalism" has catapulted Indonesia into becoming a major player in the EV supply chain, attracting billions in foreign investment and fostering local industry. President Joko Widodo touts it as a smart strategy to move Indonesia up the value chain. But is it a masterstroke or can it prove disastrous? As the nickel boom charges ahead, concerns are growing about environmental degradation, overreliance on China, and volatile market swings that could shock Indonesia's future. Nickel nationalism presents a double-edged sword – one that could either supercharge Indonesia's economy or leave lasting scars.

From ore exporter to battery hub

On the surface, Indonesia's policy looks like a brilliant success. Since implementing the nickel ore export ban in January 2020, the country has lured a flood of investment into nickel smelters and battery materials plants, especially from China. The numbers are striking. In 2013, before the policy shift, Indonesia earned around $6 billion from nickel exports (mostly raw ore). By 2022, after downstream investments took off, the value of Indonesia's nickel exports had skyrocketed to $30 billion? – a five-fold increase?.

Essentially, Indonesia stopped selling dirt-cheap ore and started selling higher-value ferronickel, stainless steel, and battery chemicals. Chinese steel giants like Tsingshan set up massive nickel smelting parks in Sulawesi and Maluku. Today, Indonesia accounts for 22% of the world's nickel reserves and has leveraged that clout to become the world's largest nickel producer?. "The strategy dramatically boosted Indonesia's export earnings – from $6 billion in 2013 to about $30 billion in 2022 after the ban," notes an analysis by the Australian Institute of International Affairs?. Indeed, nickel and its derivatives are now a top export for Indonesia, helping narrow trade deficits and create jobs in smelter towns. By many measures, nickel nationalism has been a savvy economic move.

Jakarta has also positioned this as a cornerstone of its green industry ambitions. Nickel is a key ingredient in lithium-ion batteries for electric cars. By funneling nickel into domestic refining, Indonesia aims to build an end-to-end EV supply chain onshore – from mining to battery production to possibly EV manufacturing. The government's Making Indonesia 4.0 plan and "EV Roadmap" envision Indonesia as a global hub for EV batteries. Already, major battery makers from South Korea and Europe are eyeing joint ventures in Indonesia's nickel-rich industrial zones. In short, Indonesia is trying to ride the global electrification wave, using nickel as the ticket to industrial modernization. It's a bold attempt to break out of the "middle-income trap" by moving from raw commodity exporter to high-value manufacturer.

At what cost? Environmental and social impact

Beneath the gleaming promise, however, lie deep concerns. The nickel boom is exacting a heavy toll on Indonesia's environment. Nickel mining and processing are notoriously dirty. In places like Sulawesi's Morowali and Halmahera in Maluku, thousands of hectares of rainforest have been razed for mines and smelter complexes. A 2024 report by Climate Rights International documented that at one Chinese-run nickel industrial park, over 5,300 hectares of tropical forest (roughly 6,000 football fields) were cleared since 2018? to make way for operations. Rivers and coastal waters near nickel sites have turned reddish-brown from ore runoff and waste.

Processing nickel laterite ore into battery-grade material often involves energy-intensive methods like high-pressure acid leaching (HPAL), which produce toxic tailings. Activists fear these tailings could contaminate the Coral Triangle's rich marine ecosystems if not properly managed. Moreover, the energy feeding Indonesia's smelters is far from green – many new coal-fired power plants have been built to power nickel processing?. Counterintuitively, Indonesia's EV battery push is burning more coal, raising its carbon emissions even as it pitches itself as part of the climate solution?. This paradox led one analyst to warn that Indonesia's "green" nickel is coming at the price of felling forests and expanding fossil fuel use, a contradictory outcome?. The long-term environmental costs – deforestation, polluted waters, higher CO2 emissions – could undercut Indonesia's sustainable development and even provoke local backlash.

Communities in mining regions have also faced disruptions. Reports from Sulawesi tell of land disputes and an influx of tens of thousands of foreign (mostly Chinese) workers to build and run the smelters, straining local social dynamics. Some Indonesian workers complain of wage disparities and harsh conditions in Chinese-operated plants. The government insists benefits like jobs and infrastructure outweigh these issues, but tensions linger on the ground. If not managed inclusively, the nickel bonanza could breed resentment in the very areas it's meant to uplift.

WTO battles and market risks

Indonesia's nickel nationalism isn't playing out in a vacuum – it's ruffling feathers globally. The European Union took Indonesia to the World Trade Organization (WTO) over the ore export ban, arguing it violates free trade rules. In 2022, a WTO panel ruled against Indonesia, saying the ban and domestic processing requirement broke trade agreements?. Jakarta has defiantly appealed, with Coordinating Minister Airlangga Hartarto slamming the ruling as "economic imperialism" and insisting on Indonesia's sovereign right to manage its resources.

This assertiveness fits President Jokowi's resource nationalism stance, but it carries risks. Persistently defying WTO decisions could invite trade retaliation or deter non-Chinese investors wary of unpredictable policies. Already, Indonesia's export bans (it plans to ban raw bauxite exports too) have raised concerns among some trading partners. While China has embraced Indonesia's nickel ban (since it forces Chinese companies to invest in-country to secure nickel supply, which they have done eagerly), others in the West are more hesitant. The EU's and US's push for resilient supply chains might favor Indonesia in theory (as an alternative to China for critical minerals), but they also demand adherence to trade norms and sustainability – areas where Indonesia must reassure.

Market volatility is another concern. Indonesia is flooding the world with nickel at an unprecedented rate. Its refined nickel production has surged so fast that global nickel prices have at times slumped due to oversupply. There is a real risk of "feast to famine" cycles. If too much nickel capacity comes online, prices could crash, hurting Indonesia's export earnings and rendering some investments uneconomic. Conversely, if EV battery technology shifts away from nickel-intensive chemistries (for instance, toward lithium iron phosphate batteries that use no nickel), demand for Indonesia's product could plateau. Indonesia is essentially betting that a nickel-driven EV boom will persist for decades – a reasonable bet now, but not guaranteed long-term given rapid tech innovation in energy storage. A future shock could come if the market Indonesia has geared up to serve suddenly shifts or if a global nickel glut occurs. The country could be left with white-elephant smelters and ghost towns reminiscent of mining booms gone bust.

Chinese dominance – boon or vulnerability?

A final aspect of Indonesia's nickel strategy is its heavy reliance on Chinese investment and technology. Chinese firms (often with local partners) dominate Indonesia's new smelters. They bring capital and expertise, which is good for fast growth. But it also means China controls much of the downstream value chain. For example, one giant complex, Indonesia Weda Bay Industrial Park, is a joint venture of Chinese companies and France's Eramet, and has become a major exporter of battery-grade nickel?. Beijing's policy banks have funded infrastructure like coal plants to power these parks?.

In essence, Indonesia has exchanged dependence on exporting ore for dependence on Chinese markets and investors. This could be risky if geopolitical frictions increase. So far, China and Indonesia's interests align (China needs nickel for batteries; Indonesia needs investment), but if that changes – say, China finds alternative sources or nickel recycling ramps up – Indonesia could be left in the lurch. Moreover, with Chinese entities controlling operations, how much high-tech transfer and local upskilling is really happening? Skeptics worry Indonesia may still be stuck in a relatively low value-added role (mining and basic processing) while foreigners handle the high-tech end (battery cells, EV manufacturing). The government counters that global partnerships are bringing in knowledge and that plans for local battery production by companies like LG and CATL are underway. Striking a balance between welcoming foreign capital and nurturing domestic capabilities will be crucial to ensure this strategy truly pays off in the long run.

Smart policy tweaks needed

Indonesia's nickel nationalism is neither pure triumph nor impending disaster – it's a calculated gamble that needs fine-tuning. To solidify the "smart strategy" narrative, Jakarta should enact policies mitigating the downsides. That means strengthening environmental safeguards: enforce strict standards on waste management at smelters, require reforestation and land reclamation by miners, and monitor pollution closely. Indonesia can't afford to trade ecological ruin for short-term gains. It also means broadening the investor base. Incentives could be given to non-Chinese companies to invest, promoting diversity and competition. Developing more domestic enterprises in the nickel processing value chain (perhaps through joint ventures) would keep more value in-country.

On the market front, Indonesia might coordinate with other nickel-producing nations to avoid price-crushing oversupply – perhaps an OPEC-style forum for nickel? And parallel investments in R&D for battery recycling and alternative battery tech can future-proof the industry. In fact, a portion of the windfall from nickel exports should be funneled into a sovereign fund or innovation fund to prepare for the day when nickel is less in demand or reserves dwindle. As of now, Indonesia's reserves-to-production ratio suggests a few decades of nickel left; thinking beyond that horizon is imperative. Officials often say this policy is about "not selling our future cheap." To make that true, Indonesia must manage nickel nationalism prudently to avoid sowing the seeds of a future shock.

My final thoughts

Indonesia's bold nickel gambit has shown that a developing country can exert real leverage in global supply chains with visionary (and somewhat protectionist) policy. It turned the nation from a mere raw material source into a vital link in the EV boom – a move many now hail as forward-looking and sovereign. The strategy is already paying dividends in investment and output; in that sense, it's smart. But the warning signs – deforestation, carbon emissions, overreliance on a single commodity and single partner (China) – cannot be ignored. Indonesia stands at a crossroads: if it doubles down on sustainable practices and economic diversification even as it milks the nickel opportunity, it can secure long-term prosperity. If it neglects these and blindly rides the nickel wave, that wave could eventually crash. Nickel nationalism is a high-stakes race between Indonesia's ambition and the potential unintended consequences of that ambition. The world is watching closely, because the outcome will offer lessons for many resource-rich nations seeking to break the raw-export mold. Will Indonesia's nickel revolution be remembered as a masterstroke or a cautionary tale? The answer will depend on choices made in the next few years.

References

• Guberman, D., & Schreiber, S. (2024). Export restrictions on minerals and metals: Indonesia's export ban of nickel. United States International Trade Commission. https://www.usitc.gov/publications/332/working_papers/ermm_indonesia_export_ban_of_nickel.pdf

• Australian Institute of International Affairs. (2024). Indonesia's nickel supremacy: China's backing and Australia's decline. https://www.internationalaffairs.org.au/australianoutlook/indonesias-nickel-supremacy-chinas-backing-and-australias-decline/

• Associated Press. (2024). https://apnews.com/article/indonesia-nickel-deforestation-rainforest-mining-tesla-ev-184550cddf1df6aad8e883862ab366df

• Australian Institute of International Affairs. (2024). Nickel nationalism: Resource downstreaming and the attainment of Golden Indonesia 2045. https://www.internationalaffairs.org.au/australianoutlook/nickel-nationalism-resource-downstreaming-and-the-attainment-of-golden-indonesia-2045/

[Dr. Sameer Kumar, Associate Professor, Asia-Europe Institute, Universiti Malaya, Kuala Lumpur.]

Source: https://www.eurasiareview.com/04042025-is-indonesias-nickel-nationalism-a-smart-strategy-analysis