The road to Indonesia’s nickel industrialisation runs through China
the road to
indonesia’s nickel industrialisation
runs through china
WRITTEN BY ANOUSHKA SINGH
11 March 2026
Accounting for nearly 60 per cent of global nickel output, Indonesia has positioned itself at the centre of the global critical minerals race through hilirisasi, a downstreaming strategy designed to escape the ‘raw materials trap’ that resource-rich countries in the Global South often face. This industrial policy bans the export of raw minerals, requiring them to be processed, refined, and manufactured domestically to capture greater value at home. However, Indonesia’s nickel boom has become a study in partial upgrading: export values have surged, but dependence on foreign capital, technology, and labour — most notably from China — has deepened.
During former President Joko Widodo’s administration (2014 to 2024), Indonesia pursued a series of strategic policies in the natural resources sector, most prominently the export ban on raw materials first announced in 2014 and later reinforced with a complete ban in 2020. The 2020 Mining Law was envisaged to further strengthen state control over natural resources by granting the Indonesian government exclusive authority to issue licenses in the mining sector and prioritise the domestic distribution of critical minerals. This shift in resource governance policy was intended to herald an era of resource sovereignty and challenge the status quo of neo-colonial extraction.
By repositioning itself as an exporter of finished products rather than raw commodities, Indonesia sought to move up global value chains in emerging green industries and attract foreign direct investment. These ambitions were further institutionalised under the 2020-2024 National Medium-Term Development Plan, which laid the groundwork for building a world-class electric vehicles (EV) hub. Framed by Jakarta as a necessary step towards industrial self-reliance and economic sovereignty, the policy has since become one of the most ambitious experiments in resource nationalism in the era of the energy transition.
From resource nationalism to structural dependence
In practice, Indonesia’s resource governance reforms have often produced outcomes that diverge from the policy’s intended objectives. The expansion of downstream nickel processing has increased reliance on Chinese-backed conglomerates, while Indonesian-owned enterprises remain largely confined to low-value refining activities, accounting for only 13 per cent of nickel refining capacity. Despite the mining sector contributing a sizeable 12 per cent towards Indonesia’s GDP, these gains have not translated into broad-based poverty alleviation.
Without rewriting the terms on which capital and expertise enter the sector, Indonesia’s nickel future may continue to be shaped elsewhere, despite being mined at home.
These uneven outcomes are closely tied to the patterns of foreign investment underpinning Indonesia’s downstreaming strategy. China sits at the centre of Indonesia’s nickel economy as an investor, machinery supplier, and principal consumer. Since President Xi Jinping’s 2013 address to Indonesia’s parliament launching the maritime pillar of the Belt and Road Initiative (BRI), Beijing has deepened its footprint in Indonesia’s mining sector. The Maritime Silk Road’s emphasis on port construction, logistics, and energy infrastructure critical to downstream processing has facilitated the integration of nickel processing zones — particularly in Sulawesi and Maluku — into China-centric supply chains. Over the past decade, China has reportedly invested more than USD 65 billion and now controls roughly three-quarters of Indonesia’s nickel industry, either through direct ownership or partnerships with domestic companies. Apart from powering its energy transition boom, Indonesian nickel has become a strategic input in China’s EV and battery supply chains. With 90 per cent of Indonesian nickel exports going to China, Beijing has strong incentives to expand its overseas investments in critical mineral ores.
While other foreign firms — such as Brazil’s Vale Base Metals, France’s Eramet, and Australia’s Nickel Industries Limited — are also active players in the market, Chinese capital and equipment have connected Indonesian ore to regional processing and manufacturing networks, reshaping who captures the largest share of the country’s nickel boom. This imbalance is explicitly reflected in profit distribution. The downstreaming policies have had a tremendous impact on Indonesia’s nickel export structure, with export values rising from USD 5 billion in 2015 to USD 33 billion in 2023 — a jump of more than 600 per cent in less than a decade. However, Indonesian economist Faisal Basri has argued that only around 10 per cent of these profits reach Indonesian companies, with the remaining 90 per cent accrued to foreign companies, particularly from China. As a result, domestic firms capture only a narrow slice of value created by downstream expansion.
Technological dependence further entrenches this asymmetry. Chinese imports account for 80 to 90 per cent of the machinery used during the refining stage with firms like Tsingshan Holding Group and Jiangsu Delong Nickel Industry controlling an estimated 75 per cent of domestic refining capacity. Although Indonesia possesses abundant resources, its capacity to independently develop and operate advanced refining technologies remains limited. Downstreaming has, therefore, bound Indonesia into an asymmetric relationship in which resource ownership has not translated into technological or industrial control but instead laid the foundation of a relationship characterised by technological dependence and uneven value capture.
Environmental ramifications and social marginalisation
Beyond the financial outflows, downstreaming has also produced a development model in which large, strategically significant projects tend to sideline the needs of local economies. A persistent shortage of skilled labour has limited the integration of downstream activities into domestic production networks, especially in the Sulawesi region, where Chinese workers dominate managerial and technical roles while local workers are relegated to low-skilled jobs. As the primary buyers of raw nickel in Indonesia’s domestic market, Chinese players are able to exert significant influence over pricing, often pushing prices below prevailing market averages. This downward pressure on margins has encouraged cost-cutting across the supply chain, at times incentivising practices that fall short of environmental and workplace safety standards. This pressure affects both Indonesian workers and Chinese workers employed at mining and processing sites, many of whom face hazardous conditions and limited protections. These dynamics are further reinforced by the Indonesian government’s policies that fast-track critical mineral undertakings as national strategic projects, allowing Environmental Impact Assessment (EIA) norms to be bypassed, weakening regulatory enforcement, and limiting grievance redressal mechanisms.
The Indonesian Morowali Industrial Park (IMIP), located in Central Sulawesi, plays a pivotal role in Indonesia’s nickel transformation. Developed through China’s BRI investments, it was established through a collaboration between China’s Tsingshan Group and Indonesia’s Bintang Delapan. While the influx of Chinese capital has boosted capacity, the minilast ng boom has also sparked concerns on the ground. From its earliest construction stages, the project raised many challenging questions about the social and environmental costs linked with industrial expansion. According to a 2024 study, three of the surrounding villages of IMIP — Bahomakmur, Fatufia and Labota — had average concentrations of particulate matter and sulphur dioxide above the stipulated government standards. Similar patterns are also visible at North Maluku’s Weda Bay Industrial Park (IWIP), which began operations in 2019. The expansion of IWIP has posed a significant threat to the indigenous O’Hongana Manyawa community as rampant deforestation and water pollution have led to dwindling land and food resources, pushing the indigenous tribe to closer contact with outsiders. In the islands of Sulawesi and Obi, coastal waters have turned red due to contamination by heavy metals, undermining the livelihoods of the local fishing communities and artisanal fishers.
From downstreaming to dependency management
The rise of other foreign players in the nickel market, such as the US, will test Indonesia’s ability to manage these relations without solidifying dependence on a dominant partner. The challenge lies in leveraging this competition among foreign players to strengthen local technological expertise and further shift away from exploitative terms of value capture, specifically by Chinese firms.
Despite its ambitions to position itself as a global EV powerhouse, Indonesia remains significantly behind that goalpost. Indonesia’s prioritisation of nickel processing capacity has sidelined its progress towards leadership in lithium-ion battery production or EV manufacturing, allowing these segments of the value chain to be dominated by external actors. Therefore, its EV ambitions can only be realised through the cultivation of domestic technological capabilities and sustained demand.
In order to shift away from these exploitative patterns, it is necessary to re-imagine a new model of resource governance that empowers domestic producers and local stakeholders. Meaningful engagement with local communities and their integration into a just transition framework is an essential pre-requisite. For instance, Yayasan Mitra Hijau — an organisation part of the global Climate Action Network — provides capacity building support to communities of South Sumatra and East Kalimantan, ensuring that the livelihoods of the most vulnerable are not neglected. Moreover, enforceable environmental safeguards coupled with accountability mechanisms are indispensable for breaking the extractive logics Indonesia finds itself mired in.
If Jakarta truly seeks industrial sovereignty from China, this would require moving beyond treating downstreaming as a slogan and making technology transfer and local capacity-building central to investment agreements. Following the precedent set by industrial policies in East Asia, this would entail a push towards mandatory joint ventures with Indonesian firms, binding requirements for skills and training across the value chain, and encouraging the transfer of operational and managerial control to domestic players. Laying the groundwork for effective domestic capacity and capability would also require initiating technology transfer and diversifying relations with other technology-advanced economies — such as South Korea and Japan in battery manufacturing, Germany in industrial machinery and recycling technologies, and Australia in critical minerals processing. As the scramble for critical minerals intensifies on a global scale, the costs of such dependency are likely to increase rather than dissipate. Without rewriting the terms on which capital and expertise enter the sector, Indonesia’s nickel future may continue to be shaped elsewhere, despite being mined at home.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent those of the 9DASHLINE.com platform.
Author biography
Anoushka Singh is a Research Intern at the Indian Council of World Affairs, New Delhi and has previously graduated with a master’s in International Relations and Area Studies from Jawaharlal Nehru University (JNU), New Delhi. Image credit: Ludomił Sawicki/Unsplash.