Mission Brief (TL;DR)
Indonesia, the world's top nickel producer, doubled down on its export ban, triggering a global scramble for the crucial battery metal. Jakarta aims to become a dominant player in the electric vehicle (EV) battery supply chain through aggressive domestic processing mandates. However, this protectionist play risks alienating key trading partners, distorting global markets, and potentially undermining its own long-term economic goals. The gamble hinges on Indonesia successfully attracting foreign investment in its smelting and refining industries while navigating geopolitical tensions and environmental concerns.
Patch Notes
In 2020, Indonesia implemented a ban on the export of unprocessed nickel ore, forcing companies to invest in domestic smelters to process the ore into higher-value products like nickel pig iron (NPI) and, eventually, battery-grade nickel. This was intended to 'buff' Indonesia's position in the EV supply chain. While successful in attracting some investment, primarily from Chinese companies, concerns remain about the environmental impact of these smelters, which often rely on coal-fired power and produce significant waste. Furthermore, the resulting glut of NPI has depressed global nickel prices, benefiting some downstream consumers (like Chinese stainless steel producers) but hurting other nickel miners globally. The EU filed a complaint with the WTO, challenging the legality of the export ban, alleging unfair trade practices. The ban remains in effect as of January 2026 despite the WTO's ruling against Indonesia's policy. Other nickel-producing nations, such as the Philippines and Australia, are watching closely, weighing whether to adopt similar resource nationalism strategies. Indonesia is lobbying hard to establish its battery industry but it is having to do so whilst also dealing with international criticism over environmental damage caused by nickel processing plants.
The Meta
Over the next 6-12 months, expect increased volatility in global nickel markets. Indonesia's bargaining power will likely increase if EV demand continues to surge, although they will be operating in an uncertain environment. Other nations are likely to consider implementing Indonesia's trade tactics, should they prove successful. The EU is likely to implement retaliatory tariffs or pursue other trade remedies to pressure Indonesia to relax its export restrictions. The environmental lobby may use ESG concerns as a debuff against companies investing in Indonesian nickel projects. If Indonesia fails to attract sufficient investment in sustainable processing technologies, its nickel ambitions could become a Pyrrhic victory, sacrificing environmental sustainability for short-term economic gains.
Sources
- Argus Media: Indonesia nickel export ban to boost HPAL output
- China Dialogue: Is Indonesia’s nickel boom worth the environmental cost?
- Reuters: Indonesia's nickel exports surge, trade surplus widens
- European Commission: EU launches WTO case against Indonesia concerning export restrictions on raw materials
- The Conversation: Nickel mining in Indonesia is booming, but at what cost to the environment?
- Nikkei Asia: Indonesia's nickel export ban stokes concern in Japan