Indonesia's Investment Ministry said this week that new commitments to build nickel processing and battery precursor plants in Central Sulawesi and North Maluku have been signed since the start of 2026, as the country continues a policy of requiring nickel ore to be processed domestically rather than exported raw.
The ministry did not disclose a combined dollar figure for the new projects but said the bulk of the commitments involve expansions of existing industrial parks, including the Indonesia Morowali Industrial Park and the Indonesia Weda Bay Industrial Park, both of which already host nickel smelting and battery precursor operations tied to Chinese and South Korean manufacturers.
Policy roots trace back to 2020 export ban
Indonesia banned exports of unprocessed nickel ore in January 2020, forcing miners to sell to domestic smelters or build their own processing capacity. The policy drew a challenge at the World Trade Organization from the European Union, which Indonesia lost in 2022, though the country continued the ban while pursuing an appeal.
Since the ban took effect, Indonesia has become the world's largest producer of refined nickel, according to figures published by the U.S. Geological Survey, with output concentrated in Class I nickel used for stainless steel and Class II nickel matte and mixed hydroxide precipitate used in battery materials.
Battery makers cite proximity to raw material
LG Energy Solution and China's CATL both operate battery material joint ventures in Indonesia, drawn by proximity to nickel ore reserves that the country's Energy and Mineral Resources Ministry estimates account for roughly a quarter of global reserves. A spokesperson for Indonesia's Investment Coordinating Board said in a statement that several unnamed battery material producers are in advanced discussions to add precursor and cathode capacity at existing sites.
Separately, Indonesia's state mining holding company MIND ID said it is evaluating additional smelter capacity at its subsidiary PT Vale Indonesia's operations in Sulawesi, without providing a timeline for a final investment decision.
Price volatility remains a constraint
Nickel prices on the London Metal Exchange have traded well below the highs recorded in 2022, when a short squeeze briefly halted trading. Lower prices have pressured margins at several Indonesian smelters, and the country's Nickel Miners Association said in July that a number of smaller, less efficient rotary kiln-electric furnace operators had scaled back output or paused operations amid the price environment.
The Investment Ministry said downstream projects tied to battery-grade nickel, which carry higher processing margins than stainless-steel-grade output, have been less affected by the price decline than ferronickel producers serving the stainless steel market.
Regional competition from the Philippines
The Philippines, Indonesia's closest regional competitor in nickel ore supply, has continued to export raw ore rather than adopt a domestic processing requirement, a policy difference that Philippine mining industry groups have periodically pointed to as a missed opportunity to capture more of the battery supply chain locally. The Philippine Department of Trade and Industry has said it is studying incentives for domestic processing but has not proposed an export restriction similar to Indonesia's.
Indonesia's Coordinating Ministry for Maritime and Investment Affairs said further downstreaming regulations covering copper and bauxite, modeled on the nickel policy, remain under review, without specifying a timeline for implementation.
Labor and environmental scrutiny continue
Indonesia's nickel processing expansion has drawn continued scrutiny from labor and environmental groups. The Jakarta-based advocacy group Trend Asia said in a June report that several smelter sites in Sulawesi and North Maluku rely on coal-fired captive power plants, which it said undercuts the emissions profile of nickel destined for electric vehicle batteries sold as low-carbon.
Indonesia's Ministry of Energy and Mineral Resources has said captive coal plants tied to industrial parks are being evaluated for partial conversion to gas and renewable sources, though no binding timeline has been set. Separately, Indonesia's Manpower Ministry confirmed in July that a fatal accident at a nickel smelter in Central Sulawesi, the fourth such incident reported at industrial park sites since 2023, remains under investigation by local labor inspectors.
Foreign ownership rules under review
Indonesia's Investment Ministry is also reviewing foreign ownership caps for downstream mineral processing facilities, according to a ministry official who spoke at a mining industry conference in Jakarta in July. The official said the review is intended to balance continued foreign capital inflows with a separate government target of increasing domestic and state ownership stakes in strategic mineral processing assets over the next several years.
Indonesia's sovereign wealth fund, the Indonesia Investment Authority, has previously taken minority stakes in nickel processing joint ventures alongside foreign partners, a structure officials have said could serve as a template for future projects.