A recent report by the Washington-based nonprofit C4ADS has revealed that Chinese firms control approximately 75% of Indonesia’s nickel refining capacity. This dominance has raised concerns about supply chain control, economic influence, and environmental risks, particularly as nickel plays a crucial role in the global electric vehicle (EV) market.
Indonesia is the world’s largest nickel producer, with a refining capacity of 8 million metric tons spread across 33 companies. Over the years, the country has implemented policies that ban the export of raw nickel ore, forcing companies to refine nickel domestically. This has attracted massive Chinese investment, leading to China’s significant control over smelting operations.
The report showed that more than 70% of Indonesia’s refining capacity is managed by two leading Chinese firms, Tsingshan Holding Group and Jiangsu Delong Nickel Industry Co. Ltd. These firms were early investors in Indonesia’s nickel industry, positioning them as dominant players as the country scaled up production.
Nickel is a key component in EV batteries, making Indonesia’s production crucial to global supply chains. However, China’s dominance in this sector presents challenges for U.S. and European automakers, which face increasing restrictions on trade with China. This dependence places Western automakers at a competitive disadvantage in the rapidly growing EV market.
Additionally, concerns have been raised over China’s influence on global nickel prices and its ability to control the flow of nickel to different markets. If China were to restrict supply, it could lead to price fluctuations and supply shortages for companies outside its trade network.
Recognizing the risks of excessive foreign control, Indonesian President Prabowo Subianto has launched a task force to develop the downstream mineral industry using domestic financing. The goal is to increase local ownership and reduce the perception that foreign companies are benefiting disproportionately from Indonesia’s resources.
Additionally, Chinese companies have started reducing their stakes in some smelters to make their products more accessible to the U.S. market. In October 2024, Tsingshan sold a 30% stake in one of its smelters to Indonesian state miner Aneka Tambang, signaling a shift in ownership structures.
In addition to China’s economic influence, safety concerns remain an issue in Chinese-run facilities. In December 2023, a fire at a Tsingshan facility resulted in worker fatalities, leading to negligence charges against two employees. Earlier in 2023, violent clashes at a Jiangsu Delong-owned smelter in North Morowali left two workers dead.
China’s stranglehold over Indonesia’s nickel industry has far-reaching consequences, affecting Indonesia’s economic independence, global EV supply chains, and workplace safety. While efforts are underway to increase local control and diversify ownership, China’s dominance remains a major challenge for policymakers and industry leaders worldwide.
However, efforts are underway by companies like Fathom Nickel Inc. (CSE: FNI) (FSE: 6Q5) (OTCQB: FNICF) to create alternative sources of nickel within the North American region, free from Chinese control.
NOTE TO INVESTORS: The latest news and updates relating to Fathom Nickel Inc. (CSE: FNI) (FSE: 6Q5) (OTCQB: FNICF) are available in the company’s newsroom at https://ibn.fm/FNICF
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