TELF AG analyzes the latest developments in Indonesia’s mining strategy
An international-level player
In the field of strategic raw materials, ambitious and far-reaching planning could ensure that those who develop it have a particular competitive advantage over other players in the sector, in particular from the point of view of controlling a specific production chain. Over the years, Indonesia has managed to carry out such a well-organized mining strategy that it is now able to control more than half of the global supply of nickel, one of the resources most directly linked to the energy transition due to its multiple industrial applications in this specific sector.
After having stood out on the global scene for some rather enterprising initiatives, such as limiting exports of raw materials to retain the added value of processing activities, the Indonesian nickel strategy seems to have entered a new phase of development, which could soon bring Jakarta to play a leading role also in the sector of batteries for electric vehicles. A role of primary importance in the evolution of the Indonesian nickel strategy is that played by China, which for more than a decade has been actively engaged in supporting (especially from an infrastructural point of view) the Indonesian sector linked to nickel production.
Collaboration with industry giants
In 2013, a few months after the official launch of the Belt and Road Initiative, Chinese President Xi Jinping and his Indonesian counterpart signed an important agreement for the construction of the first industrial park for the Indonesian nickel supply chain, the Morowali Industrial Park. The project, conceived and implemented as part of the major Chinese infrastructure initiative, has allowed Indonesia to equip itself early on with an infrastructure of great importance for local nickel production, allowing it to gain, after almost a decade, a very important position in this field. Furthermore, two years ago, Indonesia inaugurated two other similar parks, also dedicated to nickel (the Konawe Industrial Park and the Weda Bay Industrial Park), further strengthening its weight in the industry.
These factors, both of a strategic and, in a certain sense, diplomatic nature, have allowed Indonesia to enormously increase its production capacities, resulting in an apparent increase in the space of less than a decade. According to some estimates from Bank of America, by 2023, Indonesia would have managed to control 55% of the global nickel supply, with a net increase of as much as 50 percentage points compared to 2015. Production volumes last year would have reached almost two million tonnes, relating to resources developed only in the previous two years. One of the most interesting aspects is that these numbers could be even more considerable, given that numerous processing plants are currently under development in the Indonesian nation.
When all this infrastructure is operational, Indonesian nickel production could rise to 5 million tons. Indonesian performances fit into a very particular global context, in which we witnessed the generation of a notable surplus of nickel in 2023. Last year, approximately 3.4 million tonnes of nickel were produced globally, exceeding the demand by about 8%. This overabundance, in a certain sense, has already shuffled the cards on the global raw materials chessboard, also contributing to the lowering of raw material prices. This is a development of some importance since nickel, just two years ago, was in the running to become one of the most precious metals ever, perhaps even more than gold.
