August 2021
From a relatively insignificant finished nickel producer in 2014, to expecting to have overtaken China’s production volumes this year, Indonesia has been on quite the rise.

The rapid rise in finished nickel supply from the country has been driven by government policy. Its continued ban on the export of raw nickel ores—despite temporary loosening of restrictions on other ores—continues to drive processing capacity development and sets Indonesia up to continue meeting the demand for nickel products from both the stainless steel and growing EV battery sectors.

Following the announcement of the Indonesian raw ore export ban in 2014, China—who had previously approached Indonesia as a quarry—led by Tsingshan, essentially started to offshore a significant proportion of its nickel processing capacity.



To date, Indonesia has predominately produced nickel products for the stainless-steel industry. This has also seen the development of significant stainless capacity co-located with nickel smelters. The increasing interest in the EV sector is seeing the start of a shift to producing nickel products more geared

Demonstrating the impact of the country’s raw ore export ban, the government has reported that in 2020 33.3Mt of nickel ore was processed domestically. This is from a mined production of 35.5Mt, representing a 94% domestic value add ratio.  

Target utilisation for nickel processing capacity is 70% for ferronickel and NPI while the nickel matte capacity utilisation target is 90%. In both cases the country is currently overachieving, realising 89% utilisation for ferronickel and 96% for matte in 2020. High utilisation is in response to surging demand in China from the stainless-steel industry as infrastructure and construction focussed stimulus is rolled out. The booming demand and continued build out of Indonesian capacity suggest the country is in it for the long haul and will be meeting nickel demand growth for the foreseeable future. Tsingshan’s announcement of plans to produce matte from its capacity in the country is suggestive of Indonesia being a one-stop shop for all your nickel needs, in which ever form takes your fancy.

The ‘agricultural’ mining methods employed and dependence on coal power sources for the power intensive industry have the potential to generate ESG concerns to potential (Western) customers—Tesla, waving around its “giant contract” for “responsibly produced nickel” has not publicly engaged with Indonesian producers.

Along with heavy involvement of Chinese producers in the Indonesian industry the continued capacity development appears focussed in one direction and potentially pointing to a theme of China offshoring its carbon emissions to meet its commitments.


What’s to Come

Capacity development is ongoing. Indonesia’s Ministry of Energy and Natural Resources (MEMR) had indicated in 2019 that there were 41 nickel smelter projects in the pipeline across the country, with 11 completed by the end of that year and 8 between 40-99% complete and 22 less than 40%.

In early 2020 (pre-pandemic) the project pipeline included 5 smelters expected to be complete within the year, with capacity totalling 201ktpa of ferronickel and NPI, and a planned total of 29 planned to be in operation by 2022. While many of these projects were no doubt been delayed by the pandemic, and some may never be realised, capacity development is in full flight.

In mid-2021, the MEMR indicated there were 16 operational smelters with three nickel smelters brought into production this year (all delayed from the 5 expected in 2020):

- The ~23ktpa PT Cahaya Modern Metal Industri was fully constructed and undergoing production trials.

- PT Smelter Nickel Indonesia was fully constructed and had started production trials before they were suspended, with funding required to continue operations.

- A 65ktpa ANTAM operated smelter was virtually complete but was not operational due to electricity supply issues.

The majority of nickel supply in the future will come predominately from collaborations between Indonesian and Chinese companies. PT Aneka Tambang (Persero) (ANTAM) and PT Vale Indonesia are also understood to be taking part in HPAL development projects

In particular, Tsingshan, along with its more established Morowali Industrial Park (IMIP) interests on Sulawesi, continues to build out capacity and is also developing the Weda Bay Industrial Park (IWIP) on North Maluku.

Some further projects of note from major industry players announced just this year, though no completion date has been given, include:

- China’s Zhejiang Huayou Cobalt announced in May it would be partnering battery maker EVE Energy, Tsingshan and other partners to develop a smelter at IWIP. The project has a proposed capacity of 120ktpa nickel and 15ktpa cobalt and;

- China’s steel behemoth Baowu Group in June announced that through its subsidiary Taigang Iron and Steel it was joining Vale and Shandong Xinhai Technology to produce NPI at the proposed 73ktpa Bahodopi nickel processing facility (8 RKEFs). This capacity is to be developed at IMIP.

Despite this rush of developments exhibiting the desired outcome of the government’s ore export ban/domestic value add policy, further intervention may be in the wings. In June this year rumblings of a possible restriction on ferronickel and NPI construction were reported to encourage domestic development of capacity for the higher value-added nickel materials for the battery sector.

This initiative has been framed as an effort to maximise value add to the higher-grade ore in the country (saprolite)—though total nickel reserves are not considered constrained. The policy would not impact currently under-construction capacity. Indonesia has clearly stated ambitions to develop a full nickel supply chain including nickel sulphate then further along to EV batteries and even EV assembly. While ambitious and clearly a longer-term project, history suggests they are not afraid to use the powers of government to push their agenda.

A potential game changer to the form of nickel products coming out of Indonesia was Tsingshan’s March announcement of flexible capability to produce the higher-grade nickel matte from its current and under development NPI capacity at IMIP.


But Wait, There’s More

While the above focusses on finished nickel production from Indonesia—currently dominated by stainless steel inputs—the recent start-up of the Halmahera Persada Lygend (PT HPAL) 35ktpa High Pressure Acid Leach (HPAL) plant on Obi Island represents a new phase in Indonesia’s nickel production story. It is the first project in the country to produce mixed nickel-cobalt hydroxide precipitate (MHP), a nickel intermediate for the EV battery sector. A second phase of the project will see the plant produce 52ktpa nickel sulphate—a finished nickel product.

More are to come with a possible production capacity of up to 360ktpa of nickel in MHP in the pipeline. A further two HPAL plants had planned to start operation at IMIP this year but have been delayed to 2022—the 50ktpa QMB New Energy Material and 60ktpa PT Huayue.

These projects would not be expected to be affected by the rumoured capacity restrictions which may come into force as HPAL’s process the lower grade limonite nickel ores.