Indonesia’s nickel strategy began as a defensive move: stop exporting raw ore, force foreign buyers to build smelters at home, and capture more of the value chain. The 2020 export ban triggered global complaints, startled metals markets, and drew a WTO challenge. Yet the ban also worked, at least in its narrow objective. It concentrated investment in Sulawesi and Halmahera, accelerated refinery construction, and placed Indonesia at the centre of the global EV metals race. What remains unsettled is whether this leverage can survive the next decade’s technological and geopolitical shifts.

From Ore Supplier to Processing Hub

The ban created powerful incentives. Ore that once left Indonesian ports for Chinese refineries now flows into a domestic network of nickel pig iron (NPI) and high-pressure acid leach (HPAL) plants. These complexes financed heavily by Chinese capital and engineering expertise have pushed Indonesia’s share of global nickel output beyond 50%. The transformation is visible in satellite imagery: where rainforest once met coastline, industrial corridors now glow with the heat of smelters.

Yet the deeper question is what kind of processing Indonesia has actually won. Most Indonesian output feeds lower-grade stainless-steel supply chains rather than the highest-value battery materials. The state’s long-term ambition capturing the cathode and precursor markets remains constrained by technology, environmental concerns, and the dominance of foreign operators who control the refining know-how.

The Chinese Paradox

China’s presence in Indonesia’s nickel sector is both an enabler and a trap. Without Chinese financing and engineering, Indonesia’s refinery boom would have taken far longer. But the dominance of Chinese firms raises uncomfortable dependencies. They own or operate key plants, control much of the technology, and integrate Indonesian output into Chinese-centered supply chains. Jakarta wants leverage; Beijing wants secure feedstock. Their goals coincide only partially.

A more autonomous industrial base would require Indonesia to cultivate alternative partners — Korean, Japanese, European — while ensuring that environmental standards do not cripple investment. So far, diversification exists more in policy papers than in physical infrastructure.

The Cost of Rapid Industrialisation

The speed of the nickel build-out has produced predictable frictions. Energy systems strain under surging industrial demand. Coal plants are often built to power smelters, raising emissions even as nickel feeds cleaner technologies abroad. Local communities face pollution, contested land rights and limited economic spillovers. And the state contends with a governance challenge: how to regulate companies that arrived with both capital and bargaining power.

In several districts, smelter clusters behave like quasi-autonomous enclaves. They create employment, but much of it is low-skilled, with managerial roles dominated by foreign labour. The challenge for Jakarta is to turn these enclaves into genuine industrial ecosystems rather than isolated extraction zones with smokestacks.

The EV Market’s Technological Clock

Nickel’s centrality to batteries is not guaranteed indefinitely. Battery chemistries are shifting; iron-phosphate (LFP) cells are spreading; solid-state designs lurk on the horizon. Indonesia’s strategy relies on a world where nickel-rich chemistries remain dominant. A technological pivot could leave billions of dollars of smelting and refining infrastructure mismatched to demand.

For now, global automakers still prefer high-nickel cells for energy density. But the market’s trajectory is uncertain enough to push Indonesian policymakers toward hedging: encouraging diversification into cobalt, bauxite, copper and battery recycling.

Where the Leverage Comes From

Indonesia’s leverage does not lie merely in its ore reserves but in their concentration. Major EV economies cannot diversify away quickly. The country’s ban proved that a single policy decision could jolt global supply chains. Yet leverage is most effective when it is used sparingly. Overreach through abrupt rules, inconsistent licensing or punitive export measures risks pushing investors toward long-term alternatives in Africa or Latin America.

Numbers Behind the Nickel Strategy

The Political Logic

Nickel is not just an industrial policy; it is a political one. President Jokowi framed the ban as national dignity the end of a colonial division of labour where Indonesia exported raw materials and imported finished goods. The narrative resonates with voters and elites alike. But future administrations will inherit a complex web of contracts, environmental liabilities and strategic choices. Resource nationalism is a powerful message; it is less clear whether it can serve as a stable foundation for industrial policy beyond the current boom.

The Long-Term Test

Indonesia’s nickel revolution will be judged not by the number of smelters built but by the depth of the industries that emerge around them. Durable success would involve local firms mastering critical refining technologies, producing battery-grade materials, capturing more intellectual property and developing workers beyond basic industrial roles. It would also require diversifying energy inputs to reduce the coal shadow that hangs over the sector.

If Indonesia becomes not just a supplier of processed metals but a producer of high-value battery materials integrated into global automotive supply chains, its leverage will persist. If not, the country may find that controlling ore is not the same as controlling the future.