Indonesia's Nickel Strategy Shift: Value Addition Reshapes Global Market

Indonesia mines more nickel than any other country, producing more than 60% of the world’s supply. For about a decade, Jakarta has pursued “downstreaming” — a strategy to move beyond exporting raw ore and up the value-added chain. In 2026, Indonesia sharply cut the amount of ore companies are allowed to mine under its annual mining permit system, known locally as the RKAB. Approvals fell to roughly 260 million to 270 million tons nationwide, down from 379 million tons the year before — a cut of about a third. Weda Bay, the world’s largest nickel mine, is jointly owned by China’s Tsingshan (51.3%), France’s Eramet (37.8%) and Indonesia’s state miner Antam (10%). Its output was slashed by more than 70%, and mining there halted entirely by the end of May. Critics, particularly in China, argue this proves downstreaming has failed. Their reasoning: If the processing industry had truly succeeded, why restrict the raw material it depends on? That argument assumes the goal was always to maximize nickel output. It wasn’t. Three separate changes made alongside this year’s mining cuts reveal the real goal: not less nickel, but nickel worth more by the time it leaves the country. The first change concerns what kind of factory gets to exist. Indonesia has stopped approving new licenses for plants that produce only basic, early-stage products such as nickel pig iron — an alloy used mainly in stainless steel — and matte, a crude intermediate that still needs significant further refining. So far, Indonesia has faced a “hollow middle” in its industry, with midstream nickel processing lagging in investment. New factories are still allowed, but only if they commit to refining further — into materials used in EV batteries, such as nickel sulfate or cathode material, the part of a battery that stores energy. That’s not abandoning the nickel industry; it’s raising the bar for what counts as building one. The second change concerns who gets the raw material. The quota system now rewards companies for moving further down the value chain, rather than treating every miner the same. Nickel Industries, an Australian miner, received an increased 2026 quota specifically because it is building a plant designed to produce battery-grade material rather than raw ore. The company is positioned to seek further increases tied to that same buildout later this year. Companies investing in the advanced end of the industry get more access to ore; companies doing only basic processing don’t. Ore is increasingly steered toward the parts of the industry Jakarta wants to grow, rather than handed out on a first-come, first-served basis to whoever wants to dig. The third change — and the clearest evidence of intent — is in how Indonesia prices the ore itself. In April 2026, the government rewrote the formula used to set the minimum price miners must be paid, and that minimum rose significantly. For the first time, other valuable metals mixed in with the ore — cobalt and iron, which carry their own pricing factor, and chromium, a smaller one — are priced and paid for, rather than handed to processors for free as they had been for years. That moves real money out of processors’ margins and into miners’ pockets, and indirectly into state revenue, regardless of how many tons get mined. Together, the three changes show that Indonesia isn’t just mining less. It’s restructuring who’s allowed to build what, who gets first claim on the ore and how much that ore is worth once it changes hands — all pointing in the same direction. The market backs this up — this isn’t just theory. Nickel pig iron, the basic product Indonesia already produces in abundance, remains oversupplied and cheap: The global surplus was estimated at about 212,000 tons in 2025 and is expected to grow this year. The more advanced battery-grade materials, meanwhile, are tight enough that prices jump whenever a major producer signals a slowdown — exactly the reaction that shows up when supply hasn’t kept pace with demand. Plentiful basic material, scarce advanced material: That’s precisely the gap the three changes are designed to close, and the price data shows the gap is real — not something invented after the fact to justify the cuts. There’s a simpler logic underneath the detail, too. Indonesia’s own boom helped flood the world with nickel and push prices down, hurting profits even at factories processing record volumes. Selling twice as much ore for half the price isn’t success — it’s a race to the bottom. Oil-producing nations have limited their output, some in cartel fashion, for decades to keep prices from collapsing, and nobody calls that proof that the oil industry has failed. None of this means the changes are painless. Real workers and companies are affected, and that cost shouldn’t be waved away. But judging the policy purely by how many tons of raw ore leave the ground misses what it was actually built to do. Indonesia was never trying to maximize the nickel it digs up. It was trying to decide what that nickel becomes, and this year’s overhaul is the clearest sign yet of where Jakarta wants that ore to end up in value-added forms. Bhima Yudhistira Adhinegara is the executive director of the Center of Economic and Law Studies (CELIOS). Muhammad Zulfikar Rakhmat is the director of the China-Indonesia and MENA-Indonesia desks at CELIOS.