Indonesia has increased its market share from 31.5% in 2020 to 60.2% in 2024, according to S&P Global Market Intelligence. This meteoric rise rests on an audacious strategy: forcing foreign companies to build their processing plants on Indonesian soil to access nickel, a metal indispensable to the stainless steel industry and electric batteries. Jakarta has just taken a new step by reducing its production quotas from 272 million tonnes in 2024 to 150 million tonnes in 2025, triggering a surge in prices.
For the first time, an emerging nation is dictating terms to the market for a strategic raw material. This leverage capacity transforms every Indonesian production decision into a geopolitical event. Jakarta’s control over more than 60% of global refined nickel supply is redefining international industrial balances and forcing Western manufacturers to rethink their supply chains.
This industrial revolution is no accident. It stems from a methodical strategy launched in 2020 with a total ban on raw ore exports. Jakarta imposed on the entire world: “if you want our nickel, you must refine it here.” The consequences now measure in tens of billions of dollars in foreign investments and unprecedented geopolitical power dynamics.
The essentials
- Indonesia is reducing its nickel production quotas from 272 to 150 million tonnes in 2025, a 45% decrease
- Its share of the global market increased from 31.5% in 2020 to 60.2% in 2024 thanks to the ban on exporting raw ore
- Chinese companies have invested 30 billion dollars in the Indonesian nickel sector since 2020
- The WTO condemned this strategy in 2022, but Jakarta refuses to comply with this decision
- Goldman Sachs forecasts an average price of $17,200 per tonne for 2026
The export ban forces the world to align
Indonesia’s ban on nickel ore exports, which came into effect in January 2020, represents much more than a conventional protectionist measure. It constitutes a radical reversal of the rules of the global industrial game. Rather than shipping raw ore and later repurchasing expensive finished products, Jakarta has forced companies to build their industries on Indonesian soil.
This strategy rests on an inescapable geological reality: the Indonesian archipelago holds approximately 21 million tonnes of proven nickel reserves, or 31 to 42% of global reserves depending on classification methodologies. This dominant position transforms every government decision into an adjustment variable for the global market.
The results have exceeded initial expectations. Indonesian nickel exports increased from $2.9 billion in 2014 to $34.4 billion in 2023. This twelvefold multiplication illustrates the effectiveness of capturing added value. Nickel export revenues have jumped from approximately $800 million in 2020 to $8 billion in 2023-2024.
The transformation goes beyond the numbers. Indonesia has shifted from a horizontal extraction model to vertical integration encompassing extraction, processing, and refining. This evolution allows it to capture value-added margins traditionally retained by downstream processing countries, fundamentally altering the economic distribution of mineral wealth.
China becomes Jakarta’s indispensable ally
The Indonesian ban has created a Sino-Indonesian strategic alliance that now dominates the sector. Chinese companies, desperate to secure supplies for their stainless steel and battery industries, rushed to build processing plants on Indonesian soil.
Chinese investments have reached considerable proportions. China’s annual direct investment in Indonesia reached $4.4 billion in 2021 and $4.5 billion in 2022, with a total of $30 billion invested in the Indonesian nickel sector according to 2024 estimates.
This collaboration has created gigantic industrial complexes. The Morowali industrial park in Central Sulawesi, co-developed by China’s Tsingshan and an Indonesian partner, spans 4,000 hectares and constitutes Asia’s largest nickel processing complex. Tsingshan and Jiangsu Delong together control more than 70% of Indonesian refining capacity since 2023.
Chinese domination extends to every link in the chain. China supplies 80 to 90% of Indonesia’s refining equipment imports, and Chinese companies control approximately 75% of refining capacity while increasing stainless steel production from 4 to 7.5 million tonnes between 2020 and 2024.
This interdependence creates a new geopolitical balance. China, the principal buyer of Indonesian nickel, imported more than 60% of its nickel ore from Indonesia in 2023 according to the International Nickel Study Group. Indonesia is no longer exporting merely a raw material: it is exporting geopolitics.
Production quotas become a market weapon
Indonesia is no longer merely controlling access to its resources. It is now actively manipulating global supply through its RKAB system (Rencana Kerja dan Anggaran Biaya), the annual quota mechanism that sets authorized production volumes for each company.
The shift from a triennial approval system to annual approvals makes the system much more responsive, as quotas can be revised much more quickly. This evolution aims to curb overproduction and stabilize prices by giving the government more control over nickel supply.
The drastic reduction in quotas for 2025 illustrates this new reality. This 44% decrease in 2025 is unprecedented. Macquarie Group estimates that the Indonesian reduction could decrease global supply by 35%, or more than one-third of global supply lost in a single year.
This strategy rests on an apparent paradox. Despite reports indicating that Indonesia is not fully utilizing its production quotas, current primary Indonesian supply still exceeds demand. The government is exploiting this situation to artificially create scarcity and support prices.
The impact on prices is immediate. Nickel prices fluctuated throughout 2025 but stabilized around $15,000 per tonne in the third quarter. Goldman Sachs raised its nickel forecasts after prices surged more than 30% from mid-December to a peak of $18,700 in January.
Europe contests the Indonesian strategy without success
Indonesian domination provokes strong Western resistance, led by the European Union, which depends on nickel for its steel industry. Europe believes that Indonesian restrictions unduly and illegally limit access to raw materials necessary for stainless steel production and distort global ore prices.
The trade dispute quickly became judicialized. In November 2022, the WTO panel published a report detailing its findings and determined that Indonesia’s nickel ore export ban was incompatible with its WTO obligations. European arguments center on the incompatibility of the export ban and domestic transformation requirements with Article XI:1 of GATT 1994.
Jakarta refuses to comply with this decision. In December 2022, Indonesia appealed this determination to the appellate body, contesting certain issues of law and legal interpretations of the panel report. This obstruction strategy relies on WTO paralysis: 29 other cases are pending and the backlog cannot be cleared as long as the United States maintains its veto on the appellate body.
Europe strikes back through other channels. The European Commission launched a consultation on the possible use of the Enforcement Regulation in its dispute settlement case on Indonesian nickel export restrictions. This regulation allows the EU to enforce the international obligations to which WTO members have committed when a trade dispute is blocked despite the EU’s good faith efforts to follow dispute settlement procedures.
But this European resistance collides with a new geopolitical reality. Global trends such as WTO dysfunction and the energy transition are reinforcing the rise of these emerging economies, while the EU, which seeks to secure its strategic space through rule-making, sees its interests increasingly challenged by these rising powers.
Battery manufacturers face a new power dynamic
The global electric battery industry is discovering the limits of its dependence on Indonesian nickel. Stainless steel represents approximately two-thirds of the market, and batteries for electric vehicles constitute the fastest-growing segment. This concentration creates new strategic vulnerabilities.
Indonesian domination coincides with technological evolution in the sector. Prospects for growth in nickel demand for electric vehicles have slowed in recent years for two main reasons: lithium iron phosphate (LFP) batteries, which contain no nickel, have gained significant market share, particularly in China.
This technological transition does not undermine Indonesia’s position. This production surge has driven down global prices, creating a profitability crisis. Lower prices can discourage new entrants, reinforcing the domination of Chinese investors and the monopsony power of Chinese buyers.
Indonesia anticipates this evolution by diversifying its industrial strategy. Aluminum constitutes another example of how rapid growth in Indonesian capacity could place pressure on the market, with a forecast of tripling Indonesian aluminum production by 2027, from 800,000 tonnes in 2025 to nearly 2.8 million tonnes.
Resource sovereignty redefines the global industrial order
Indonesia’s strategy transcends simple commercial protectionism. It embodies a new conception of economic sovereignty for resource-rich nations. Indonesia’s ban on raw nickel exports in 2020 was not simply an economic measure but an act of self-determination and a direct challenge to the status quo of neocolonial extraction.
This approach is catching on. Some governments, the Philippines for example, have considered resource nationalism and export restrictions, but few have gone as far as Indonesia in implementing a firm ban coupled with such proactive downstream incentives. The most recent example was the Democratic Republic of Congo banning cobalt exports earlier this year.
Jakarta is extending this logic to other raw materials. Indonesia’s success with nickel has even encouraged it to ban exports of other raw minerals (such as bauxite for aluminum) to replicate this downstream-focused model. This export ban constitutes the cornerstone of a policy initiated by the government a decade ago to advance Indonesia along the value chain for a wide variety of other mining raw materials, with bans on bauxite and copper in 2023.
The impact extends beyond Indonesian borders. Governments are prioritizing diversification of supply chains away from Indonesia-China domination, giving growing attention to Western sulfide projects such as Canada Nickel’s Crawford. This reshuffling of global industrial cards is redefining the geopolitical balances of the energy transition.
The Indonesian model demonstrates that an emerging nation can impose its rules on Western and Chinese multinationals. Indonesia’s control over approximately 62% of global nickel production in 2025, with projections reaching 70% by 2026, creates an unprecedented market concentration in critical mineral supply chains, parallel to China’s control over rare earth processing.
Jakarta has proven that a coherent resource sovereignty strategy can reverse traditional power dynamics. Indonesian nickel no longer merely feeds global industry: it restructures it according to Jakarta’s interests. This silent revolution transforms the archipelago into the arbiter of prices and investments in a sector vital to the global energy transition.