Indonesia Expands Nickel Industry Amid Environmental Concerns
Indonesia has leveraged its vast nickel ore reserves to develop a domestic processing industry, a move aimed at increasing revenue and economic diversification. The country, which banned nickel ore exports in 2020, has since become the leading global producer of refined nickel, accounting for nearly half of the world’s supply in 2023. The export ban prompted significant foreign investment, particularly from Chinese companies, into domestic refining facilities.
Nickel is essential for producing stainless steel and batteries used in electric vehicles, as well as in renewable energy technologies. With global demand for critical minerals projected to triple by 2030, the United Nations has urged nations to implement standards for sustainable extraction and processing.
The economic benefits of Indonesia’s nickel policy are evident. According to UNCTAD, Indonesia’s value-added nickel production increased from $1.1 billion in 2021 to $20.8 billion. The government also reported a rise in tax revenues from the nickel industry, from $266 million in 2019 to $1.3 billion in 2022. Efforts to further industrialize the sector include incentives for investors, streamlined business approvals, and workforce development programs.
However, environmental and trade concerns have emerged. The European Union challenged Indonesia’s export ban at the World Trade Organization, which ruled it unlawful, though Indonesia has appealed. Conservation groups highlight deforestation, pollution, and damage to coastal ecosystems as major issues, particularly in Sulawesi and the Moluccas. Reports indicate that over 75,000 hectares of forest have been lost due to nickel extraction, with additional areas at risk.
Indonesia has introduced measures to mitigate environmental damage, including a nickel traceability system to monitor production and ensure compliance with environmental regulations. Companies are also encouraged to obtain international ESG certifications to improve industry sustainability. The UN has called for a global framework to ensure that critical mineral extraction supports sustainable development and environmental protection.
