Indonesian Nickel Producers and the EV Supply Chain Revolution

Indonesia's strategic positioning in the global green energy transition has become a focal point for investors and policymakers alike. As the world's largest nickel producer, the country is leveraging its resource endowment to dominate the EV battery supply chain, a sector projected to grow exponentially in the coming decade. By combining aggressive production targets, stringent policy reforms, and high-stakes partnerships with global battery manufacturers, Indonesia is reshaping its economic trajectory while navigating complex environmental and geopolitical challenges.

Production Capacity: A Foundation for Dominance

Indonesia's nickel production capacity is expanding rapidly. According to an APNI report, the country is projected to produce 295.4 million wet metric tons (wmt) of nickel in 2025, a 9.8% increase from the 2024 target of 271.8 million wmt. That report also notes 95 operational smelting plants-85 pyrometallurgical and 10 hydrometallurgical-with several more under construction. The government's 2025 nickel ore mining quota of 200 million metric tons further underscores its intent to control output, while adjustments to environmental and reclamation standards ensure sustainability remains a priority, as detailed in a MiningFeeds report.

However, production targets must align with market absorption. While the 2025 RKAB-approved ore quota stands at 364 million tonnes, actual demand in 2024 lagged at 220 million tonnes, according to a Mysteel report. This discrepancy highlights the need for Indonesia to balance supply-side ambitions with downstream demand, particularly as EV battery manufacturers seek stable, high-purity nickel supplies.

Policy Reforms: Regulating for Stability and Sustainability

Indonesia's recent policy shifts reflect a dual focus on price stability and environmental stewardship. Reuters reported that the government has shortened the validity of mining production quotas to one year from three years, enabling tighter control over output levels and commodity pricing. This move, announced in July 2025, aims to mitigate price volatility in nickel and coal markets, which have been under pressure due to global oversupply and shifting demand dynamics.

Environmental regulations are equally critical. Mining companies failing to meet reclamation standards face reduced quotas, incentivizing sustainable practices, as noted in the MiningFeeds report. These policies align with Indonesia's broader goal of transitioning from raw material exports to value-added products, a strategy that has already attracted over $5.9 billion in investments for integrated EV battery projects, according to an AntaraNews report.

Strategic Partnerships: Building the EV Battery Ecosystem

Indonesia's partnerships with global EV battery manufacturers are central to its downstream ambitions. The ANTAM-IBC-CBL consortium, comprising PT Aneka Tambang, Indonesia Battery Corporation, and the CATL-Brunp-Lygend (CBL) consortium, is spearheading a $5.9 billion project to create an integrated EV battery industry ecosystem, a project highlighted in earlier reporting. This initiative includes six subprojects and aims to produce 140 gigawatt hours (GWh) of battery capacity by 2030, with one-third earmarked for export, according to a Sinolytics analysis.

A landmark project is the $1.8 billion Merdeka Battery HPAL Nickel Plant, set to produce 90,000 tons of high-purity nickel for EV batteries by 2026, as reported by MiningFeeds. This facility, coupled with existing smelters, positions Indonesia to supply over a third of the nickel used in global EV batteries, according to Sinolytics. Collaborations with Chinese and South Korean firms-such as CATL, Huayou, and LG Energy Solution-have further solidified Indonesia's role in the supply chain, with Chinese companies controlling 75% of its refining capacity, per Sinolytics analysis.

Challenges and Risks

Despite its momentum, Indonesia faces significant hurdles. Environmental concerns, including deforestation and pollution from coal-dependent processing plants, threaten its green credentials, a risk highlighted by Reuters. Additionally, the rise of lithium-iron-phosphate (LFP) batteries, which require less nickel, could disrupt demand forecasts-a concern raised in MiningFeeds coverage. Geopolitical tensions also loom, as Western nations seek to diversify supply chains away from Chinese dominance in refining, which analysts have discussed in Sinolytics commentary.

The Prabowo Subianto-led government aims to address these challenges by expanding downstreaming into other critical minerals and non-mineral sectors, a strategy outlined in earlier industry reporting. However, achieving full coverage of the EV battery value chain will require robust environmental governance, equitable benefit distribution, and adaptability to evolving battery technologies.

Investment Outlook

For investors, Indonesia's nickel sector presents a high-reward, high-risk proposition. The country's control over 60% of global nickel production and its aggressive downstreaming strategy make it a linchpin in the EV supply chain, as noted in Sinolytics analysis. However, risks such as regulatory shifts, environmental scrutiny, and geopolitical realignments demand careful monitoring.

The Merdeka Plant and partnerships with CATL and Huayou signal Indonesia's intent to dominate the high-purity nickel market, a critical input for NCM batteries. If the government successfully balances growth with sustainability, Indonesia could emerge as a model for resource-rich nations navigating the green energy transition.