The International Energy Agency (IEA) has called for urgent action to secure nickel supply chains amid escalating political tensions, following a recent discovery that 75% of Indonesia’s nickel refining capacity is linked to China.
Indonesia is the world’s largest nickel producer and is projected to account for nearly two-thirds of global supply by 2030, along with 44% of the refining capacity, according to IEA research. The country already holds vast reserves of the metal, which is essential for lithium-ion batteries and stainless steel production, and has rapidly expanded its domestic refining capacity after imposing restrictions on nickel ore exports in 2020.
In a report released this week, the IEA warned that if the supply of Indonesian-refined nickel were disrupted, alternative sources would fall “significantly” short of meeting global demand. The agency estimates that non-Indonesian producers could only satisfy about half of global demand in five years.
“This underscores that, even when the global supply balance is relatively stable, critical mineral supply chains remain highly vulnerable to disruptions—whether due to extreme weather, trade conflicts, or geopolitical tensions,” the IEA stated, as reported by Global Trade Review. “This analysis highlights the urgent need to strengthen efforts to ensure the future security of critical mineral supplies.”
Critical minerals have become increasingly important to Western governments, driven by growing concerns over dependence on Chinese supply, especially as trade tensions—particularly with the United States—continue to escalate. China has already imposed export restrictions on several metals. In December, Beijing announced a complete ban on exports of gallium, germanium, antimony, and graphite to the U.S., and this month, it said licenses would be required to export tungsten, bismuth, and other materials with industrial uses.
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While China’s refined nickel exports are significantly lower than Indonesia’s, the IEA’s warnings follow a report from the non-profit organization C4ADS, which found that Chinese companies exert considerable control over Indonesia’s nickel refining sector.
C4ADS reveals that while Indonesia’s refining capacity—totaling around 8 million metric tons in 2023—is spread across 33 companies, the ownership structure is highly concentrated. “Tracing ownership reveals that Chinese companies or shareholders control 61% of refining capacity, while Indonesian companies or shareholders control just 13%. Further investigation uncovers that Chinese beneficial ownership exceeds 75%,” the report states.
This involvement, often obscured behind layers of corporate entities registered in various countries, follows significant investments from Chinese banks in the sector. C4ADS warns that this concentration of refined nickel supply will have long-term consequences.
“It will be challenging for other countries to meet domestic demand without access to Indonesian nickel,” the report says. “China’s entrenched position in the industry makes it difficult for companies to establish a fully independent and secure supply chain outside of China.”
The report also raises environmental and safety concerns surrounding Indonesia’s nickel refining sector, which may be more difficult to assess due to opaque ownership structures. Most of Indonesia’s refining operations rely on coal-fired power plants, and there have been multiple reports of poor workplace safety, with dozens of fatalities in processing facilities.
“It is crucial to identify the key players, understand their influence on the supply chain, and assess their responsibility for environmental and worker conditions,” the report notes. It adds that some Chinese shareholders in Indonesia’s refining sector have been linked to significant environmental and social issues.
A December report by McKinsey similarly warned that “limited transparency into the origins of battery raw materials poses broader ESG concerns and risks.”
Editing by Reiner Simanjuntak
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