China's Impact on Indonesia's Nickel Industry

Indonesia, home to some of the largest nickel reserves globally, plays a crucial role in the supply of this critical mineral essential for green technologies, including electric vehicle batteries and wind turbines. As the global energy transition accelerates, demand for nickel has surged, prompting Jakarta to pursue ambitious plans for its mining sector. Gracelin Baskaran from the Center for Strategic and International Studies highlights the emerging markets' push for better deals on their resources, underscoring the competitive landscape. However, Indonesia faces significant challenges, particularly due to the U.S. Inflation Reduction Act (IRA), which restricts tax credits for minerals produced by companies with over 25% Chinese ownership. In response, Indonesia is restructuring agreements with Chinese firms to ensure they hold minority stakes. Kevin O’Rourke from Reformasi Information Services warns that monitoring Chinese ownership levels may prove difficult, creating potential gray areas in compliance. Indonesia seeks a critical minerals deal with the U.S. to qualify its nickel for IRA tax credits, but this ambition has met resistance from some U.S. senators concerned about Chinese investment, labor rights, and environmental standards in Indonesia. Washington has proposed that Indonesia join the Mineral Security Partnership, aimed at fostering a sustainable mineral supply chain and improving governance in the nickel industry. Former Indonesian Trade Minister Mari Pangestu emphasizes the need for Indonesia to create an attractive investment environment for nickel mining and refining. While the intentions are clear, she notes that significant groundwork is necessary to achieve these goals and attract new investments that benefit local communities.