Indonesia holds nearly half the world’s nickel reserves—so why is it growing poorer the more it tries to 'harvest' its resources in 2026?

Recently, Indonesia has plunged headlong into a perfect storm of domestic turmoil and external pressures; within just one month, all its underlying contradictions erupted simultaneously. Understanding Indonesia’s current predicament reveals the inevitable fate shared by all resource-dependent countries. Many still perceive Indonesia as Southeast Asia’s ‘invisible powerhouse’: with 270 million people, the world’s largest nickel reserves, and abundant coal and palm oil resources, it appeared to be coasting on resource dividends. Yet real data from June 2026 paints a brutally stark picture: the Indonesian rupiah plummeted past 1:18,000 against the U.S. dollar—the weakest level in 24 years. Domestic fuel and staple food prices surged across the board, triggering successive student protests against inflation in Jakarta. Even Indonesia’s once-prized nickel industrial chain has completely collapsed. At the start of the year, Indonesia launched two aggressive policies explicitly targeting Chinese nickel enterprises in an attempt to ‘harvest’ them: slashing nickel mining quotas in half, and jacking up the nickel ore pricing coefficient from 17% to 30%. The goal was to force Chinese firms to accept inflated prices, surrender smelting technology, or even withdraw entirely from Indonesia. Yet the policy backfired spectacularly—within just 26 days. Chinese enterprises responded by suspending expansion plans and cutting production capacity. As a result, domestic Indonesian nickel smelters’ operating rates plunged to just 76%, leaving one-quarter of production lines idle. Indonesia had hoped to wield pricing power over its mineral resources to control foreign investors—but overlooked its fundamental weaknesses: no mature smelting technology, no global sales channels, and inadequate supporting infrastructure for power and logistics.

A $14-billion rescue package revived Indonesia’s nickel industry—only to forge a ‘harvesting blade’ turned against Chinese investors. Is the model of Chinese enterprises investing in and building entire industrial chains abroad about to change?

This is no ordinary resource-exporting country raising prices—it is a precisely targeted ‘harvesting order’ aimed squarely at Chinese enterprises. Globally, 70% of nickel originates from Indonesia; yet Indonesia’s transformation—from merely exporting raw nickel ore to becoming the world’s processing hub—was built entirely on massive, tangible investments and technology transfers by Chinese companies. Industrial giants such as Tsingshan, Huayou, and Gravita have poured over $12 billion into Indonesia over the past decade, lifting the country from the bottom to the apex of the global nickel value chain—only to be strangled in return. The irony is even sharper: just 26 days after wielding this ‘blade,’ Indonesia urgently suspended its new policy. This farcical reversal laid bare Jakarta’s naked greed—and sounded a stark alarm for China’s overseas industrial-chain investments. Before 2013, Indonesia remained a country scraping by on meager earnings from exporting low-grade laterite nickel ore—lacking smelting capability, lacking an industrial chain, and accounting for less than 30% of global nickel output, stuck firmly at the very bottom of the value chain. The turning point came with large-scale entry by Chinese enterprises. Around 2008, when Tsingshan Holding first arrived, local conditions on the ground were primitive: no water, no electricity, no roads—truly an uninhabited island. Power plants, ports, highways—all were constructed by Chinese firms. Even telecommunications base stations in surrounding areas had to be built as part of the package. Tsingshan introduced its RKEF pyrometallurgical smelting technology; peers soon followed. Huayou Cobalt and Gravita brought high-pressure acid leaching (HPAL) hydrometallurgical technology into the market; Delong built four phases of factories there; and CATL secured long-term supplies of high-grade nickel matte through equity participation. Over the past decade, dozens of Chinese enterprises have established world-class industrial parks in Morowali and Weda Bay, constructing a fully integrated supply chain spanning ‘mine extraction → nickel-iron smelting → nickel matte processing → battery-material manufacturing.’ Chinese enterprises invested heavily in Indonesia because the Indonesian government, eager to attract Chinese manufacturers, offered highly attractive terms: land, resource access, and preferential policies—including permission to mine nickel alongside associated cobalt and iron without separate valuation, plus favorable tax rates. Chinese firms entered under these conditions, delivering power plants, ports, factories, and advanced technologies. Between 2021 and 2025, 44% of China’s total investment in Indonesia flowed into basic nonferrous metal processing—cumulatively totaling $14 billion, almost entirely directed toward downstream nickel smelting. Tsingshan, Huayou, and Gravita transformed Indonesia from a mere exporter of raw ore into the world’s leading nickel processing center. In 2024, Indonesia became the world’s top nickel producer, accounting for over 60% of global output; the Morowali and Weda Bay industrial parks alone employ nearly 150,000 Indonesian workers. Sulawesi Island—once desperately poor—has become one of Indonesia’s fastest-growing regions. Huayou’s ‘Huafeng’ project and Gravita’s Qingmeibang project now form the world’s largest HPAL-based nickel production cluster, directly supplying battery production lines for Tesla, BMW, and other automakers. China contributed not only capital but also core technologies. Its pioneering direct steelmaking technology for laterite nickel ore slashed overall nickel-chain costs by 30%; its HPAL hydrometallurgical process made efficient utilization of low-grade nickel ore commercially viable. In short: without China’s capital, technology, and management expertise, today’s ‘global nickel capital’—Indonesia—would simply not exist. Starting in 2025, the winds shifted. After President Prabowo assumed office, he declared publicly that ‘the Indonesian people do not wish to become someone else’s rice paddy.’ What followed was a series of ‘harvesting’ measures—each strike lethal: First, tax adjustments: in spring 2025, Indonesia replaced its flat 10% nickel ore royalty rate with a progressive, price-linked royalty system—peaking at nearly 20%.

Indonesia Targets Ex-Glencore Trader Kurniawan’s Nickel Empire

19 hours ago

Indonesian authorities are taking enforcement action against former Glencore trader Arif Kurniawan over mining irregularities and forest use, potentially disrupting Indonesia's 60% share of global nickel supply.

bloomberg

2026-11-04

Indonesia Targets Ex-Glencore Trader Kurniawan’s Nickel Empire

Indonesia Targets Ex-Glencore Trader Kurniawan’s Nickel Empire

FAQ