Latest / The Emerging Markets Podcast with Fexingo: Developing Economies, Growth, and Investment / How Indonesian Nickel Became the World's Most Important Metal
Transcript
- Lucas: If I said the most strategically important metal in the world right now is nickel, not lithium, not copper, you'd probably raise an eyebrow. Luna: I would, yeah. Lithium gets all the headlines as the 'white gold' of batteries. But nickel is what actually gives those batteries energy density. Lucas: Exactly. And here's the thing — Indonesia now controls over half of the global nickel supply. Not just mining it, but processing it into battery-grade material. That's a massive shift from even five years ago. Luna: I remember when Indonesia was mostly known for exporting raw ore, then shipping it to China for processing. What changed? Lucas: A 2020 ban on exporting raw nickel ore. President Joko Widodo basically said: we're not shipping our resources out anymore. If you want Indonesian nickel, you build your smelter here. And it worked. Luna: It worked spectacularly. Chinese companies poured in — Tsingshan, Huayou, CATL — they built these massive high-pressure acid leach plants to process laterite ore into nickel sulfate for batteries. Lucas: Right. And that transformed Indonesia from a commodity supplier into a manufacturing hub. By 2024, Indonesia had the world's largest nickel processing capacity. Now in mid-2026, it's just solidified that lead. Luna: There's a real-world number that drives this home. In 2015, Indonesia produced about 150,000 tons of nickel — mostly as raw ore. By 2025, that number had tripled, and almost all of it was processed domestically. Lucas: The economic impact is staggering. Nickel exports went from under $1 billion a year to over $30 billion. That's not just GDP — it's tax revenue, infrastructure spending, and a whole new industrial workforce. Luna: And it shows up in the market data too. The iShares MSCI Indonesia ETF, ticker e i d o, is up about 6 percent over the past year. Not huge, but steady, and way better than the broader E-M index. Lucas: The EEM — the emerging markets ETF — is actually up about 1.7 percent over the last five days alone, but that's being dragged around by a lot of crosscurrents. Indonesia has its own story. Luna: It does. But there's a risk angle that doesn't get enough airtime. The environmental cost of all this processing is enormous. Those high-pressure acid leach plants produce a lot of toxic waste, and Indonesia's environmental regulations are still catching up. Lucas: It's a real tension. The nickel boom has brought jobs and investment, but local communities near smelters are dealing with water contamination and deforestation. The government is trying to tighten standards, but enforcement is spotty. Luna: And then there's the geopolitical angle. China controls a huge chunk of those processing plants. If relations between Jakarta and Beijing ever sour, that could be a problem. Lucas: Indonesia is trying to balance that by also attracting investment from South Korea — LG, Hyundai, SK On — and from Western firms like Ford and Tesla. They want to avoid becoming a Chinese satellite. Luna: It's a smart play. But it also means Indonesia is now a central piece in the global battery supply chain. Any disruption there — a policy shift, a labor strike, a natural disaster — and EV manufacturers everywhere feel it. Lucas: And that's why this story matters beyond just Indonesia. The way they've used resource nationalism to force industrialisation is becoming a template. Other countries with critical minerals are watching closely. Luna: Exactly. Chile has been talking about a national lithium company. The DRC is renegotiating mining contracts. But Indonesia is the proof of concept that actually worked at scale. Lucas: Speaking of scale — and I know this is a bit meta — but the reason we can do shows like this, digging into one country's industrial policy, is that the podcast stays ad-free and independent. If you've gotten something out of walking through the economy with us, a couple of dollars a month genuinely makes a difference. It's buy me a coffee dot com slash fexingo. No pressure, just if the show has helped you see something differently. Luna: Yeah, it's a small way to keep these deep dives coming. We really appreciate those who do. Lucas: So back to Indonesia — what's next? The government has already announced plans to ban exports of bauxite and copper ore, following the same playbook. They want to build a full downstream metal processing industry. Luna: That could be huge. If Indonesia becomes a major processor of aluminum and copper too, it could diversify away from nickel. But it also risks overreaching and spreading too thin. Lucas: There's also a looming question about battery technology. If solid-state batteries or sodium-ion batteries reduce nickel demand, Indonesia's whole bet could weaken. But that's a long-term risk, not an immediate one. Luna: For now, nickel is essential, and Indonesia is essential for nickel. It's a remarkable example of a developing economy using its resources to leapfrog into higher-value industries. Lucas: And it's a reminder that emerging markets are not all the same. Some are managing their resources strategically, and that creates real investment stories. Indonesia is one to keep watching. Luna: Definitely. On that note, let's see how the rest of the week plays out. E-M markets are showing some strength overall, but the divergence is real.