This is the first of a multi-part series on Indonesia’s nickel industry.
China’s nickel investors in Indonesia are sending a familiar warning: reverse regulatory uncertainty, or they’ll potentially walk. However, that tacit warning rests on an assumption — that Jakarta has no institutions capable of running its own nickel industry — that no longer holds.
In May, the China Chamber of Commerce in Indonesia sent an open letter to President Prabowo Subianto warning that abrupt policy shifts — from mining-quota cuts to new foreign-exchange retention rules — were undermining investor confidence.
Major Chinese smelters have recently throttled output and put expansion plans on hold in response. The underlying message seems to be that if Chinese firms lose patience, they will quit the country, dashing hopes for Indonesia’s downstream ambitions to capture more value from its mineral resources.
China’s tacit threat assumes Indonesia has no institutions of its own capable of carrying the industry forward without a major Chinese or other foreign partner directing it. But that assumption doesn’t square with what Jakarta has actually built over the past two years.
Danantara, Indonesia’s new sovereign wealth fund, announced plans in 2025 to develop 26 downstream projects worth roughly $12.4 billion, spanning mining, metals, energy and agriculture. All are explicitly aimed at keeping more value inside the country rather than exporting resources in raw or semi-processed form.
The state mining company MIND ID and a growing number of domestic private firms are positioned to take larger roles alongside Danantara — not as junior partners waiting on foreign capital to define the terms, but as co-owners structuring the projects themselves.
The area with the most room to grow this way is what industry analysts call the midstream — the stages between digging up ore and building a finished battery cell, including precursor materials, battery cathodes, specialty chemicals, recycling, process engineering, logistics and equipment maintenance.
These stages generally pay better and require more skilled work than mining or basic smelting. They are also exactly where a decade of Chinese investment has built the least, concentrating instead on nickel pig iron, ferronickel and, more recently, mixed hydroxide precipitate — the earlier, more commoditized end of the chain.
The cost of that gap shows up in Indonesia’s trade figures. The country is a net importer of advanced battery systems: An estimated 85% to 95% of domestic demand was met by imports as of 2026, with roughly 60% to 70% of that import value coming from China.
That means a country holding some of the largest nickel reserves on Earth is still buying back finished products built from cheaper chemistry elsewhere, because the domestic midstream never grew fast enough to intercept its own ore before it left the country in semi-processed form.
The chemistry has made the mismatch worse. Indonesia sold roughly 43,000 EVs in the most recent year tracked — most of them from Chinese brands including BYD, Wuling, Chery and Neta — and about 90% ran on lithium iron phosphate batteries, a chemistry that uses no nickel at all.
BYD’s new nickel-free Datang SUV drew 150,000 pre-orders in China in under two months this year, a sign that the same Chinese firms building Indonesia’s smelters are accelerating away from the nickel-heavy batteries Indonesia’s strategy assumed the world would keep buying.
Ferronickel output kept climbing anyway, meeting a market that increasingly didn’t need it for batteries — a large part of why prices collapsed even as export volumes hit records.
Danantara’s own conduct this past year shows that filling the midstream gap doesn’t require choosing sides. In May 2025, Danantara and Indonesia’s other sovereign fund, INA, signed a memorandum with France’s Eramet to build an integrated nickel-to-battery investment platform, with talks on specific projects, including further development at Weda Bay, continuing into the second half of the year.
Three months later, Danantara announced a separate cooperation agreement with China’s own GEM to develop a nickel processing hub. Signing with a French miner and a Chinese one in the same year is a reasonable description of what diversification actually looks like: not excluding any single country, but making sure Indonesian institutions have a real seat at the table regardless of which foreign partner shows up next.
None of this means Chinese capital has become irrelevant, or that domestic firms can immediately replace what a decade of China-led foreign investment built. Financing large industrial projects remains capital-intensive, and many Indonesian companies still lack the scale or established customer relationships to compete independently in global battery supply chains.
But MIND ID already has a track record worth noting. Under Indonesian mining law, foreign-owned mines must eventually divest majority ownership to Indonesian shareholders.
In July 2024, MIND ID did exactly that at nickel miner PT Vale Indonesia, buying a further 14% stake to become the controlling shareholder at 34%, without the mine’s output or its foreign technical partners disappearing.
It’s a working precedent for the model Danantara is now trying to scale across the midstream. The notion that Indonesia has no alternative to China or that Indonesia’s alternatives to China are still maturing are decidedly different claims — and only the latter is true.
Indonesia now has a sovereign fund actively financing dozens of downstream projects, a state miner with a real ownership track record, and, in the same year as its biggest quota cuts, new midstream partnerships with both Western and Chinese firms.
The more accurate question for Jakarta isn’t whether it can survive a Chinese exit that, despite Beijing’s grumbling, isn’t actually happening. It’s whether Danantara, MIND ID and domestic private capital can grow fast enough to make that question increasingly irrelevant.
Bhima Yudhistira Adhinegara is the executive director of the Center of Economic and Law Studies (CELIOS). Muhammad Zulfikar Rakhmat is the director of the China-Indonesia and MENA-Indonesia desks at CELIOS.
