New Delhi: Indonesia’s biggest foreign investor China, which controls about 75 percent of the nickel refining capacity of the country, is upset with Jakarta over new mining regulations put in place for nickel.
China claims it could upend its $50 billion worth of investments.
According to it, the new regulations, introducing a decreased production quota for miners and a changed pricing mechanism for nickel and derived products, have led to higher production costs.
The Chinese Embassy in a letter to Indonesia’s Ministry of Energy and Mineral Resources said the new regulations could threaten “operational viability of nearly all such projects,” as reported by Financial Times.
The letter, dated 21 April, elaborated how the “measures could affect $30billion in existing investments and $20billion in planned future investments”. The new pricing mechanism has led to a near 200 percent increase in production of the nickel variety used to manufacture EV batteries, according to the report by FT.
Nickel is a key critical mineral for India’s transition towards cleaner energy technologies. India imports more than 80 percent of its ferronickel (an alloy of iron and nickel), critical for steel production, from Indonesia. Nickel is a crucial material for lithium-ion batteries used in EVs, with India’s entire domestic demand for EV battery materials met through imports.
According to an analysis by Washington-based global security nonprofit C4ADS, published in February 2025, nearly 75 percent of the nickel refining capacity of Indonesia is owned by Chinese companies or stakeholders, often masqueraded behind a series of shell companies.
Many stakeholders and companies in this sector, too, have ties with the Chinese Communist Party (CCP).
The global demand for nickel is slated to rise from 3 million metric tonnes (MMTs) in 2023 to 5-6 MMTs by 2040, precipitated by the focus on clean energy technologies across the world. According to the Global Minerals Outlook 2024 report by the International Energy Agency, Indonesia and China accounted for 65 percent of the world’s refined nickel, with Indonesia alone projected to account for 44 percent refined nickel by 2040.
Under President Prabowo Subianto, the country has made key changes in its nickel production regulations with an aim to focus on higher value downstream nickel products, increase the government’s revenue, control supply volatility of nickel in the international market and address environmental concerns.
In April 2025 Indonesia revised its nickel royalty rate system by increasing the rate from a flat 10 percent on nickel ore to a progressive 14-19 percent, depending on the average London Metal Exchange (LME) nickel price over the past month. Royalty rates are the percentage of revenues generated by the mining companies paid to the government.
Along with increasing the royalty rate of nickel ore, the same regulation also brought Nickel Sulfate and Mixed Hydroxide Precipitate (MHP) under the new royalty system. Exempted earlier, Nickel Sulfate and MHP are critical in the manufacturing of EV batteries.
In June last year, through another regulation, the government stopped approving industrial business licenses for new smelters producing intermediate products such as nickel pig iron (NPI) and ferronickel, granting new licenses only if smelters further process downstream products such as nickel sulfate and stainless steel.
This was seen as a manoeuvre to move up the value chain and try to entrench a fully integrated nickel industry in Indonesia.
Under the Golden Indonesia 2045 initiative, launched in 2019 targeting the 100th year of the country’s independence, the government aims to expand into manufacturing EV batteries and EVs, rather than being restricted to exporting nickel and its intermediate products. Indonesia has a mining production quota system under which the government sets the limit for the mining companies vis-à-vis the quantity of nickel mined.
In January this year, the government made tweaks to the quota system under a new regulation. Under the changed regulations, mining companies need to re-apply every year for an approval to mine.
Earlier, the companies would need to re-apply for the same every three years. The change is expected to lead to more control on the annual output of nickel, subject to international market demands.
Shubhanker Tripathi is an alum of ThePrint School of Journalism, currently interning with ThePrint.
(Edited by Amrtansh Arora)
Also Read: The forgotten Andaman crisis. When Sukarno’s Indonesia turned against India in 1965 war