1. A Decade of Deep Cultivation: $14 Billion to Build a Global Nickel Capital
Over the past decade or more, China has invested a cumulative total of over $14 billion in Indonesia's nickel industry. Leading enterprises such as Tsingshan Group, Huayou Cobalt, CATL, GEM, Lygend Resources, and CNGR Advanced Material have successively established a presence, building a comprehensive industrial cluster locally that covers nickel resource extraction, deep processing, and new energy material applications.
Once upon a time, Indonesia possessed the world's richest laterite nickel ore resources but was constrained by underdeveloped infrastructure and a lack of smelting technology, forcing it to export raw ore at low prices. Chinese enterprises brought capital, technology, equipment, and complete supply chains – Tsingshan was the first to build an industrial park in Morowali, Central Sulawesi, developing it into one of the world's largest ferronickel production bases. Huayou Cobalt, GEM, and others followed suit, with investment scope extending from pyrometallurgy to hydrometallurgy, battery materials, and even the complete power battery industry chain.
With comprehensive empowerment from Chinese companies, Indonesia has completely shed its low-end model of "selling ore for a living," and its nickel product exports have surged from approximately $5 billion to over $30 billion. By 2025, Indonesia's nickel ore resource supply accounted for 70% of the global total, earning it the title of "Global Nickel Capital."
2. Indonesia's Policy "About-Face": Quota Cuts and Tighter Rules
Since 2026, the Indonesian government has introduced a series of resource nationalist policies aimed at retaining more industrial chain profits domestically:
In January 2026, Indonesia's Ministry of Energy and Mineral Resources signaled that it would significantly compress the annual nickel ore mining quota from 379 million tons in 2025 to between 250 and 270 million tons, a reduction of over 30%. The Weda Bay core mining area, heavily populated by Chinese investors, was hit even harder – its quota plummeted from 42 million tons to 12 million tons, a 71% drop. At the same time, the quota approval cycle reverted from a three-year period to annual approvals, significantly increasing policy uncertainty.
On April 15, a second heavy blow landed. Ministerial Decree No. 144 of the Ministry of Energy and Mineral Resources officially took effect, raising the correction coefficient for 1.6% grade nickel ore from 17% to 30%, and, for the first time, including associated metals such as cobalt, iron, and chromium in the pricing formula. Elements previously treated as "freebies" were now explicitly priced. According to estimates, this single measure increased the cost per ton of hydrometallurgical nickel ore by at least $22. With cumulative effects of multiple restrictive policies, Chinese companies saw their raw material procurement costs soar by nearly 200%.
And that wasn't all. Foreign exchange retention rules required resource companies to convert up to 50% of their export earnings into Indonesian rupiah and deposit them in state-owned banks. Calls to mandatorily increase local equity stakes for Chinese enterprises grew louder. In a joint letter to the president, the China Chamber of Commerce in Indonesia stated bluntly that Chinese companies were trapped in a dilemma of "compliance leading to losses, and operations constituting violations."
3. Chinese Companies Under Pressure: Costs Surge, Some Push Back Forcefully
Huayou Cobalt's Huafei Nickel-Cobalt project was forced to halt 50% of its production capacity starting in May due to cost overruns – a project that had contributed nearly 10% of the company's net profit the previous year. Tsingshan Group, the largest investor in Indonesia's nickel industry, saw a 70% reduction in quotas in its core mining areas, leaving its pyrometallurgical operations facing raw material shortages. CATL Brunp's matching nickel raw material supply was disrupted, limiting its power battery precursor production capacity.
On May 12, the China Chamber of Commerce in Indonesia took the rare step of submitting an open letter to President Prabowo, using stark language to directly point to a deteriorating business environment. The letter mentioned frequent regulatory changes and also directly addressed issues of bribery and interference in approvals by some public officials. Industry leaders such as Tsingshan Group, Huayou Cobalt, and Brunp are all board members of the chamber. This collective voice signaled a full-blown escalation of industrial conflicts.
Even more startling was an extreme path chosen by one Chinese-invested enterprise – dismantling an entire production line and shipping it back to China within 21 days. Preferring to bear huge relocation costs rather than sell off cheaply or compromise locally, the move was interpreted by the industry as a defiant stance to protect core technology and avoid being "taken advantage of."
4. Doubling Down: Chinese SOE Acquisitions, Giant Expansions, and New Projects Continue
However, alongside "pressure," there has been a continued "doubling down" – Chinese companies have not entirely retreated in the face of policy turmoil.
Chinese state-owned enterprises (SOEs) are bucking the trend with acquisitions: Chinese SOE Zheshang Zhongtuo acquired a 75% stake in Indonesian nickel giant GNI (Indonesia Tsingshan), becoming the controlling shareholder.
International giants continue to expand: GEM signed a $1.42 billion investment agreement with Indonesia's sovereign wealth fund Danantara; and is advancing the BNSI project in partnership with Vale and South Korea's ECOPRO. Huayou Cobalt's Pomalaa hydrometallurgical project, with an annual capacity of 120,000 metric tons of nickel metal, is progressing as planned and is expected to be completed by the end of 2026. CNGR Advanced Material has already built nearly 200,000 metric tons of nickel resource smelting capacity in Indonesia.
New projects are being signed and launched: PowerChina signed a RMB 5.456 billion general contracting contract for the Indonesia TMS nickel mine development project; Guangxin Group signed a nickel-cobalt hydrometallurgical project with a total investment of approximately $2 billion; and a Tsingshan Group joint venture nickel processing plant received a groundbreaking ceremony attended personally by the Indonesian president. CATL's Indonesia battery industry chain project represents a total investment of nearly $6 billion, covering the entire chain from nickel ore to battery recycling.
5. Unfinished Game: Deeply Entangled Interests, Neither Can Do Without the Other
This game is not simply about "turning hostile" and "withdrawing." The interests of both sides are deeply intertwined – Chinese companies cannot do without Indonesia's nickel resources, and Indonesia cannot do without China's capital, technology, and market.
Facing strong market resistance, the Indonesian government has shown signs of backing down. On May 11, the Minister of Energy and Mineral Resources announced a postponement of the increase in nickel ore royalties and export taxes; the previously scheduled hike in mining royalties for minerals, due in June, was also delayed. President Prabowo publicly acknowledged foreign investors' complaints about cumbersome approvals and called for deregulation.
But the long-term game is far from over. Indonesia's fiscal pressures and rising resource nationalism fundamentally clash with Chinese companies' needs for cost control and supply chain security. As analysts have pointed out, Chinese companies must shift from single-resource investment to a diversified global layout, incorporating geopolitical risks into pre-investment considerations. Moving from a "game of interests" to a "community with a shared future" may ultimately be the answer to this $14 billion chess game.
