HANOI, Vietnam (AP) — Indonesia is tightening state control of the world’s largest nickel supply, after years of betting that the metal would anchor a domestic electric vehicle industry, and just as global demand begins to shift away from a heavy reliance on nickel.
The move could further spread through global electric vehicle supply chains as the United States and China compete for key minerals. Indonesia is at the heart of the nickel market, with its share of global supply rising to about 60 percent in 2024 from 31.5 percent in 2020, according to S&P Global Market Intelligence, after former President Joko Widodo banned crude ore exports, drawing a surge in China-backed investment in refining.
Jakarta hoped that control of nickel would support a comprehensive domestic industry, from mining and batteries to finished cars. Experts say the promise has been used to justify deforestation and mining expansion in the name of the energy transition, even as climate risks have deepened.
In 2025, Indonesia cracked down on what it called illegal exploitation of natural resources, saying many mining and plantation licenses were affected by bribes or were never properly approved. Authorities say they have seized more than 4 million hectares (9.8 million acres) of mines, palm oil plantations and processing sites, levied $1.7 billion in fines and could seize another 4.5 million hectares this year.
But analysts warn that the crackdown comes just as nickel’s profits begin to fade, with many Chinese electric vehicles switching to battery chemistries that use far less metal, relying instead on iron-based models.
“Forests have been exploited to the brim,” said Putra Adhiguna of the Energy Shift Institute in Jakarta. “But you never got the EV value chain.”
China plays the leading role in Indonesia’s nickel sector, using the metal to support its stainless steel and clean energy industries.
The world’s largest nickel reserves are concentrated on the Indonesian island of Sulawesi, which accounts for more than half of the world’s output from nickel mines, according to the US Institute for Energy Economics and Financial Analysis, or IEEFA.
China has sourced nickel from Indonesia for decades, but the relationship deepened after Jakarta banned exports of the crude ore in 2020, drawing a surge in Chinese investment in smelters.
Nickel shipments to China have surged, with imports of matte nickel — a semi-processed material used in battery chemicals and alloys — rising nearly 28-fold between 2020 and 2023, more than 90 percent from Indonesia, according to trade data. During the same period, the combined share of North and South America in global nickel production fell from 16 percent to 7 percent, while Europe’s share fell from 35 percent to 10 percent, according to the International Nickel Study Group, an intergovernmental organization based in Lisbon.
Meanwhile, mining led to the loss of about 370,000 hectares (about 914,000 acres) of Indonesian forests between 2001 and 2020 – more than in any other country – according to an analysis by the World Resources Institute. More than a third of this loss was old-growth rainforests, which hold vast stocks of carbon and are crucial to limiting climate change.
Heavy use of coal to run Indonesia’s nickel smelters has also slowed the country’s energy transition, adding new demand for fossil fuels even as it tries to cut emissions. A 2024 analysis by IEEFA found that major nickel producers emitted about 15 million metric tons (16.5 million US tons) of greenhouse gases in 2023, largely due to their reliance on coal.
In one of the most publicized nickel seizures of the past year, Indonesian soldiers accompanied by a local television crew took control of part of the world’s largest nickel mine.
Largely owned by Chinese metals giant Tsingshan Holding Group, the mine has caused deforestation, air and water pollution and increased coal emissions while displacing communities, damaging livelihoods and exposing residents to health risks, according to a 2024 report by the nonprofit Climate Rights International.
The move was not aimed at protecting the environment or restoring forest guarantees, said Bhima Yudhistira of the Jakarta Center for Economic and Legal Studies, or CELIOS.
“There’s no guarantee that things will get better,” he said. It could get “even worse.”
Indonesia’s effort to turn its nickel reserves into the backbone of a domestic domestic industry has attracted interest from investors in South Korea and China, but has fallen short of expectations.
In July 2024, South Korea’s Hyundai Motor Group and LG Energy Solution opened Indonesia’s first EV battery factory with an annual capacity to supply more than 150,000 electric vehicles. But in April 2025, LG Energy Solution pulled out of a larger $8.4 billion battery investment, citing market and investment conditions.
An electric vehicle factory is still being built by Chinese automaker BYD. China’s CATL, the world’s largest EV battery maker, is building a battery factory with Indonesian state-owned firms.
Indonesia’s EV market is growing fast but remains small.
The country sold more than 43,000 electric vehicles in 2024, accounting for about 5 percent of total car sales, according to the Indonesia Business Council. Public charging infrastructure is limited, with around 1,500 stations nationwide in 2024.
Even if Indonesia produced 1 million electric vehicles a year — equal to its total annual car sales — and favored nickel-rich batteries, that would still consume less than 1 percent of the nation’s nickel production, according to the Energy Shift Institute.
Electric vehicle manufacturers are switching to lithium iron phosphate, or LFP, batteries, reducing the need for nickel and cobalt. LFP batteries are cheaper, more stable and longer lasting. They are used in nearly half of all electric vehicles, the International Energy Agency found.
Analysts say Indonesia’s nationalization efforts could loosen Beijing’s grip on parts of the supply chain, potentially giving Jakarta more leverage to court American buyers and investors.
A possible concession by Indonesia in long-running trade negotiations with US President Donald Trump’s administration, which are expected to end soon, would be to lift a ban on crude nickel exports to the US.
Indonesia has already invited the US to invest in its critical minerals sector as part of ongoing tariff negotiations between the two countries, although it is caught in a difficult position.
“How does Indonesia stand between the two superpowers who both want to gain control over the national resources that Indonesia has?” said Li Shuo, director of the Asia Society Policy Institute’s China Climate Center.
Other Southeast Asian countries similarly “sandwiched” between the US and China are closely following Indonesia, Li said.
“Make no mistake, it will be very difficult,” he said.
Indonesia’s land seizures risk further destabilizing its nickel industry, CELIOS’s Yudhistira added. Foreign investors monitoring the situation are likely to hesitate before committing new capital to mining and processing projects in Indonesia, he said.
“This makes the future of nickel, both mining and downstream processing, unknown,” Yudhistira said. “Uncertainty is very expensive for investors.”
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Delgado reported from Bangkok, Thailand. Associated Press writer Edna Tarigan in Jakarta contributed to this report.
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