Indonesia’s nickel industry has become a cornerstone of the global electric vehicle (EV) supply chain, offering opportunities and challenges for traders. In this Q&A by EBC Financial Group, we break down key aspects of Indonesia’s nickel boom and what it means for markets.
Q1: Why is nickel critical to the EV revolution?
Nickel is essential for lithium-ion batteries used in EVs. High-nickel batteries (like NCM or NCA) boost energy density, allowing vehicles to travel farther on a single charge.
- Indonesia supplies over 56% of the world’s mined nickel, making it a linchpin in the EV supply chain.
- Demand for Class 1 nickel (battery-grade) is rising, with prices reaching $16,500 per ton as of 1 April 2025.
Actionable Insight:
Traders should monitor Class 1 nickel prices, as demand from EV manufacturers is expected to grow 20-fold by 2040.
Q2: How does China’s investment influence Indonesia’s nickel industry?
Chinese firms control about 75% of Indonesia’s nickel production capacity. Since the 2020 ban on raw nickel exports, Chinese companies have invested over $30 billion in smelters and processing plants.
Partnerships like the Morowali Industrial Park in Sulawesi have accelerated Indonesia’s integration into global EV supply chains.
China’s dominance raises concerns about overreliance, prompting Indonesia to seek partnerships with South Korean and European firms.
Actionable Insight:
Watch for policy shifts as Indonesia diversifies investments beyond China, which could impact nickel prices and trade flows.
Q3: What are the environmental challenges of nickel mining?
Indonesia’s nickel expansion has led to deforestation, water pollution, and carbon-intensive operations.
- Over 5,000 hectares of forest have been cleared for nickel mining on Halmahera alone.
- Coal-powered smelters contribute to high emissions, undermining the sustainability goals of EV production.
Actionable Insight: Traders should track companies adopting cleaner technologies, as stricter environmental regulations could create price premiums for sustainably sourced nickel.
Q4: How is Indonesia diversifying its nickel industry?
Indonesia is attracting non-Chinese investors to reduce dependency and boost innovation.
- Hyundai and LG Chem opened Southeast Asia’s first EV battery plant in Karawang, with a $1 billion investment.
- New industrial parks like Batang Integrated Industrial Park aim to expand into renewable energy and advanced manufacturing.
Actionable Insight:
Diversification efforts could stabilise the sector and create opportunities in related commodities like cobalt and lithium.
Q5: What trading opportunities does Indonesia’s nickel boom present?
- Commodity Trading: Focus on Class 1 nickel contracts tied to EV battery production.
- Equities: Track companies involved in Indonesia’s nickel processing or EV supply chains.
- Geopolitical Factors: Monitor US-Indonesia trade relations, as incentives under the Inflation Reduction Act could shift supply chain dynamics.
Actionable Insight: Use volatility in nickel prices to identify entry points, especially during policy announcements or supply chain disruptions.
Conclusion:
Indonesia’s nickel boom is reshaping global markets, offering traders opportunities in commodities, equities, and green energy sectors. By staying informed about policy shifts and environmental trends, traders can navigate this dynamic landscape effectively.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.