China's Nickel Grab: How Indonesia's Battery Boom Became Beijing's Backdoor

In the race toward a sustainable future, nickel has emerged as one of the most essential and contested resources. A key ingredient in lithium-ion batteries, nickel plays a central role in the production of electric vehicles (EVs) and energy storage systems, cornerstones of the global clean energy transition. With around 55 million metric tonnes in known reserves, Indonesia holds the world’s largest nickel stockpile, putting it at the center of this critical shift. But while Indonesia is clearly a heavyweight in the global energy economy, the true nature of its power is far more complex.

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To boost domestic control and extract greater value from its resources, Indonesia implemented a bold “downstreaming” policy beginning in 2009. A ban on raw nickel ore exports was designed to force foreign companies to invest in smelting and refining facilities within Indonesia. President Joko Widodo doubled down on this vision with the “Making Indonesia 4.0” strategy, aiming to transform the country from a raw commodity exporter into a hub for advanced manufacturing, especially for EV batteries. On paper, the results have been impressive. Nickel-based export revenues have surged, and regional economies like North Maluku have seen GDPs skyrocket, from IDR 3 trillion in 2020 to over IDR 21 trillion in 2022.

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However, these gains come with caveats. More than 70% of Indonesia’s nickel refining capacity is now owned or controlled by Chinese companies. This dominance is largely a product of China's Belt and Road Initiative, which funnelled investment into Indonesia's strategic mineral sector at a time when global demand for EV batteries began to explode. Chinese firms like Tsingshan Group hold majority stakes in mega-projects such as the Indonesia Morowali Industrial Park (IMIP), one of the world’s largest integrated nickel refining complexes. These industrial parks are more than just smelters, they're vast ecosystems with their own ports, coal power plants, and housing, built with Chinese capital and often operated with imported Chinese expertise.

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Critics describe the situation as a form of “repackaged dependency.” While Indonesia has technically upgraded its role in the value chain, many argue it has ceded genuine control over pricing, innovation, and market influence. Domestic jobs and tax revenues have increased, but strategic decision-making remains in foreign hands. This dynamic is also reshaping global trade alliances. The U.S.-led Minerals Security Partnership (MSP), created to reduce reliance on Chinese-controlled supply chains, has invited Indonesia to participate but withheld full membership, partly due to China's deep entrenchment in its nickel sector.

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Environmental concerns add another layer of complexity. Despite nickel’s status as a “green” mineral, its extraction and processing in Indonesia often depend on dirty energy. Many of the smelting facilities are powered by coal, making the country the fifth-largest coal power generator in the world. In regions like Sulawesi and North Maluku, more than 40,000 hectares of forest have been cleared since 2010 to make way for mining and infrastructure. Meanwhile, rivers near industrial parks have shown elevated levels of heavy metal pollution, threatening both local communities and biodiversity. In many cases, the nickel needed to decarbonize transportation in the Global North is extracted in ways that intensify environmental degradation in the Global South.

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The global impact of Indonesia’s nickel dominance extends beyond Southeast Asia. China’s refinement of High-Pressure Acid Leach (HPAL) technology, a previously challenging method for processing low-grade laterite ores, has given it a technical edge that now underpins its dominance. As a result, global nickel prices have dropped, and higher-cost producers in places like Australia have struggled to compete. In early 2024, Australian officials warned that over 10,000 jobs in their domestic mining sector were at risk due to cheap Indonesian exports, many of which are backed by Chinese partners.

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Indonesia’s rise in the nickel world is both a national success story and a cautionary tale. The country has leveraged its resource base to command global attention, but the benefits are unevenly distributed, and the power increasingly belongs to others. For now, the world’s clean energy ambitions are being powered by Indonesian nickel, but under a model that is neither fully clean nor fully Indonesian.