Before 2014, Indonesia was exporting massive quantities of raw nickel ore and watching the Chinese grow wealthy by refining it. In 2014, it instituted a ban on exporting this ore. By 2024, it had captured 58% of global refined nickel production and had multiplied its export revenues in this sector by thirty, rising from 17,000 to 510,000 billion rupiah. This turnaround is real, documented, and it has fueled the ambitions of dozens of countries rich in strategic minerals who dream of imitating it.

In 2026, the model is grinding to a halt. Extraction quotas have been reduced from 375 to 270 million tonnes. Royalties have been raised. Industrial overcapacity is weighing on local prices. And the vast majority of buyers are Chinese, a dependency that seemed like a victory and now looks like a constraint. This is not the failure of Indonesian protectionism. It is its phase-boundary limit. And this limit, for India, Brazil, or Zimbabwe, which are preparing their own export bans, is probably the most valuable lesson from the past five years.

The Essentials

  • Indonesian nickel exports soared from 17,000 to 510,000 billion rupiah between 2014 and 2024, thanks to the ban on exporting raw ore, first instituted in January 2014, partially lifted in 2017, then permanently reinstated in January 2020
  • Indonesia now concentrates 58% of global refined nickel production, compared to a marginal position a decade ago
  • In 2026, extraction quotas (RKABs) were reduced to 270 million tonnes from 375 in 2025, due to the combined effect of overcapacity, environmental tensions, and a price-raising strategy
  • The price of nickel on the London Metal Exchange rose 37% between December 2025 and April 2026, a sign that Indonesia’s tightening policy has a real effect on global markets
  • Several developing countries rich in strategic minerals are preparing similar legislation, without necessarily having integrated the corrections that the 2026 phase imposes

The Ban That Changed Everything

The story begins in January 2014, when the Indonesian government for the first time bans the export of unprocessed raw minerals. The measure is lifted in 2017 under pressure from investors, then permanently reinstated in January 2020 for nickel. The logic is simple: if you want access to our resource, build the factory here.

The results exceeded projections. Dozens of smelters and refineries were established in Sulawesi and North Maluku, primarily financed by Chinese capital. Production of nickel pig iron and nickel sulfate exploded. Indonesia became the indispensable supplier of the value chain for electric vehicle batteries, a sector where demand for lithium-iron-nickel-cobalt is projected to triple every decade according to the International Energy Agency.

This industrial success has a name in the economic literature: value chain upgrading. It is the transition from a mining-rent economy, where value-added is exported along with the raw material, to an industrial economy where that value remains in the producing country. Indonesia accomplished this transition faster than anyone anticipated.

But speed was also its limit.

Overcapacity as the First Warning Signal

When a country attracts massive foreign investment in a single sector by guaranteeing access to the resource, it does not control the pace at which capital enters. Chinese factories established themselves in Indonesia not based on the needs of the global nickel market, but based on resource availability and site competitiveness.

Result: starting in 2023, the global nickel market found itself in surplus. Prices fell 45% between January 2023 and late 2024, according to the London Metal Exchange. Australian and Philippine producers suspended operations. And paradoxically, the Indonesian refineries themselves began operating below capacity, because downstream demand was not keeping pace with the output produced.

Jakarta’s response in 2026 is a voluntary compression of supply. Authorized extraction quotas (the RKABs, annual administrative quotas allocated to miners) have been reduced from 375 to 270 million tonnes. Royalties have been revised upward. The government is testing the country’s capacity to use volumes to influence prices, as OPEC does with oil.

The effect is immediate. Between December 2025 and April 2026, nickel prices on the LME rose 37%, according to Crux Investor. Jakarta has demonstrated that a dominant producer can indeed influence global prices for a critical raw material. But this demonstration has a cost: factories operate below capacity, industrial jobs are threatened, and foreign investors who bet on continued volume growth are beginning to reassess their exposure.

A Chinese Dependency Transformed into a Constraint

The second warning signal is more structural. To quickly attract the industrial investments it needed, Indonesia opened its doors wide to Chinese capital. Tsingshan, CNGR, Huayou Cobalt and other major players in the Chinese battery supply chain financed the majority of smelters. Today, China’s share is estimated at approximately 88-90% of Indonesian refined nickel exports.

This concentration was acceptable, even logical, at a time when the objective was to ramp up quickly. It becomes constraining when the United States and the European Union decide to subsidize their own critical minerals supply chains. The American Inflation Reduction Act conditions access to its tax benefits on origin and traceability criteria that effectively penalize supply chains dominated by Chinese capital. For its part, the European Critical Raw Materials Act sets diversification targets — notably a cap of 65% dependency on a single third country — and imposes supply chain traceability requirements, without providing tax credits conditioned on origin as the IRA does.

Indonesia finds itself in an uncomfortable position: its refined nickel exports are too Chinese to be fully integrated into American and European supply chains in the midst of electrification, but the country does not yet have the critical mass of alternative buyers to negotiate differently. Jakarta is working to diversify its buyer base, notably through direct negotiations with Korean and Japanese automakers. But recomposing a value chain takes a decade, not a presidential mandate.

This imbalance illustrates a problem that development economists know well: attracting foreign investment based on a single resource tends to create second-order dependencies that are difficult to undo. Indonesia has avoided dependency on raw mineral buyers, but it has substituted another form of dependency: that of investors and industrial buyers concentrated on a single downstream market.

What Zimbabwe, India, and Brazil Saw Without Seeing What Comes Next

The success of Indonesia’s model in its early years became a reference point in policy discussions among countries rich in strategic minerals. Zimbabwe banned the export of raw lithium in 2023. India is considering similar restrictions on its graphite and manganese reserves. Brazil regularly debates protective measures on its lithium and rare earths, extending the logics described in the Draghi report for European critical raw materials.

These countries saw the figures from 2021 and 2022, when the Indonesian model showed only its successes. They have not yet integrated the signals from 2025 and 2026.

The first correction that Indonesian experience imposes: the temporal sequence of industrial policy. Banning the export of raw materials without having previously built the capacity to receive industrial investors, logistics infrastructure, a skilled workforce, and a stable regulatory framework, is shutting off the tap before plugging in the hose. Zimbabwe learned this lesson the hard way: its lithium export ban was partially suspended in 2024 due to lack of industrial investors ready to settle within the planned timeframe.

The second correction concerns buyer diversification from the outset of the model. If a country aspires to transform its resource to sell to the most lucrative markets — electric vehicle batteries in Europe and the United States, semiconductors in Korea and Japan — it must attract investors who have access to these downstream markets from the beginning, not merely those offering the fastest capital. Indonesia optimized for speed. Brazil and India, if they take more time, can optimize for destination.

The third correction is institutional. The Indonesian RKAB quotas were adjusted in 2026 not according to a preestablished plan but in reaction to unanticipated overcapacity. A supply governance mechanism defined upstream, with sectoral investment caps and market-based criteria, would allow avoiding the indigestion phase Indonesia is experiencing today. Chile has managed its copper revenues through a sovereign wealth fund since 1985. Norway regulates its hydrocarbon production through temporary licenses. These models exist, they are documented, they are adaptable.

What the 37% LME Increase Really Reveals

The 37% increase in nickel prices between December 2025 and April 2026 is generally read as good news for producing countries. It is, in the short term. But it primarily reveals the vulnerability mechanism Indonesia has locked itself into.

When a country represents 58% of global supply of a metal, every domestic policy decision becomes a global market signal. The reduction in RKAB quotas was read by traders as a sustained compression of supply. Prices rose. But this increase inevitably attracts two responses: the development of alternative mines in other countries (Philippines, Russia, New Caledonia) and accelerated research into nickel-free cathodes in the battery industry. LFP, the lithium iron phosphate batteries that several automakers have adopted for their entry-level vehicles, contain no nickel. Tesla, BYD and Volkswagen are all increasing their share of production in this format.

Indonesia thus risks a strategic scissors effect: its price-raising policy accelerates the technological substitution that makes its nickel less central over time. This is not a reason to abandon efforts to monetize the resource. It is a reason to set a temporal horizon for the strategy and to prepare industrial diversification beyond nickel starting now. Jakarta is indeed working to attract investments in battery cell manufacturing and materials chemistry, to move even further up the value chain. The direction is right. Its pace remains uncertain.

The Art of Copying Without Copying the Errors

It would be easy to conclude that natural resource protectionism does not work. That would be wrong. Indonesia has created a nickel refining industry that barely existed fifteen years ago. Hundreds of thousands of industrial jobs have been created. Tax revenues have been mobilized. Proof that this strategy can work is provided.

The question for India, Brazil, and Zimbabwe is not “should we adopt the Indonesian model?” but “what corrections must we make to avoid the phase-boundary traps Indonesia failed to anticipate?”

These corrections are identifiable. A slower sequence that gives time for industrial capacity to be built before banning exports. Deliberate diversification of investment sources to avoid becoming dependent on a single downstream market. A supply governance mechanism defined ex ante rather than reactively. And reflection on the demand horizon: in what world will the metal still be strategic in twenty years?

Indonesia has solved the first problem of mining development: it has captured added value from its resource. It now works on the second, more difficult one: not becoming a prisoner to that added value if technologies or markets evolve. For countries arriving after it, having access to this complete trajectory, with its successes and its friction zones, is a rare opportunity. Textbooks of development economics are rarely built in real time.

Sources

  1. Crux Investor, “Indonesia’s 2026 policy tightening has repriced the nickel cost map” : https://www.cruxinvestor.com/posts/indonesias-2026-policy-tightening-has-repriced-the-nickel-cost-map
  2. Centre for Strategic and International Studies (CSIS), analyses on Indonesian mining policies : https://www.csis.org/blogs/charting-geoeconomics/indonesian-industrialization-downstreaming-value-chain
  3. Lowy Institute, analyses on the political economy of nickel in Southeast Asia
  4. International Energy Agency, Critical Minerals Market Review 2024
  5. London Metal Exchange, nickel price history 2023-2026
  6. IEA – Prohibition of the export of nickel ore : https://www.iea.org/policies/16084-prohibition-of-the-export-of-nickel-ore
  7. USITC – Indonesia’s Export Ban of Nickel (Working Paper) : https://www.usitc.gov/publications/332/working_papers/ermm_indonesia_export_ban_of_nickel.pdf
  8. Benchmark Minerals – Indonesia 2026 RKAB Quota : https://source.benchmarkminerals.com/article/indonesia-announces-significantly-lower-nickel-rkab-quotas
  9. Reuters/Mining.com – C4ADS Report on Chinese nickel refining control : https://www.mining.com/web/chinese-firms-control-around-75-of-indonesian-nickel-capacity-report-finds/
  10. INSG / Investing News Network – Nickel surplus 2023-2025 : https://investingnews.com/insg-nickel-market-forecast/
  11. IEA – European Critical Raw Materials Act : https://www.iea.org/policies/17662-european-critical-raw-materials-act
  12. ScienceInsights / Nissan – LFP batteries without nickel : https://scienceinsights.org/what-is-a-lithium-iron-phosphate-lfp-battery/
  13. BPS/Katadata – Top 10 Indonesian nickel buyers 2023 : https://databoks.katadata.co.id/en/agroindustry/statistics/d4ca0de2dc43c02/top-10-indonesian-nickel-buyers-as-of-october-2023