Latest / International Business with Fexingo: Global Trade, Cross-Border Deals, and Multinational Operations / How Indonesia Is Becoming the World's Nickel King
Transcript
- Lucas: So you probably saw the headlines about South Korean chip stocks getting hammered this week — Samsung and SK Hynix both down over seven percent yesterday. Luna: Yeah, brutal day for Seoul. But I want to talk about a different part of the supply chain story — one that's been quietly reshaping global trade for years now. Lucas: You're thinking about nickel, right? And specifically, Indonesia. Luna: Exactly. Indonesia has become the world's dominant nickel producer, and it's not just a mining story — it's a master class in resource nationalism. Lucas: Let's set the stage. Back in 2020, Indonesia banned the export of raw nickel ore. The logic was simple: stop shipping cheap ore to China, force companies to build smelters and processing plants inside Indonesia. And it worked. Luna: Worked is an understatement. Nickel output has doubled since then — from around 800,000 tons annually to over one point six million tons. They now account for more than half of global production. Lucas: And the biggest beneficiary? Chinese companies. They poured billions into Indonesian smelters. Tsingshan, the stainless steel giant, built massive nickel processing complexes. Today, most of the nickel that goes into EV batteries passes through Indonesia. Luna: But it's not just about volume. Indonesia also controls the cost curve. They produce nickel pig iron and nickel matte at a fraction of the cost of competitors in Australia or Canada. That gives them pricing power. Lucas: Right. And that's why automakers are paying attention. Tesla signed a five-year deal with a local supplier back in 2023. BYD, Ford, Hyundai — they've all been sniffing around. Luna: Let's talk about the broader trade picture. With the dollar index easing slightly — it's at 120.9, down from 121 — that helps emerging market commodity exporters. But Indonesia's strategy isn't dependent on currency moves. Lucas: No, it's structural. They've literally rewritten the rules of the nickel trade. And it's not just nickel — they've hinted at similar bans for bauxite and copper. It's a playbook other countries are watching. Luna: Speaking of which, I want to come back to something you said about the South Korea rout. It's a reminder that supply chain concentration is a double-edged sword. South Korea dominates memory chips; Indonesia dominates nickel. Lucas: And when something goes wrong in one node — like the chip rout this week — it ripples globally. For nickel, the risks are different. Environmental groups have raised alarms about deforestation and coal-powered smelters. Luna: Indonesia's nickel processing is incredibly carbon-intensive. Most smelters run on coal-fired power. That's a problem if the whole point of EVs is to reduce emissions. Lucas: Yeah, the carbon footprint of Indonesian nickel is something like 20 to 30 tons of CO2 per ton of nickel — compared to maybe 5 for Australian nickel. That's a huge gap. Luna: But the market hasn't really punished them for it. Automakers are still buying because the price is low and the supply is reliable. Lucas: One more thing: the geopolitical angle. The US has been trying to diversify critical mineral supply chains away from China. But Indonesia is so entwined with Chinese capital that it's hard to bypass. Luna: Hey, before we go deeper — a quick honest thing. You know how we keep this show ad-free and independent? It's because a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo. Lucas: And it really does make a difference. If these conversations have moved your work forward in some small way, that's the reason we keep doing them. Luna: Exactly. No pressure, just a note of thanks. Now, back to Indonesia — what does this mean for the next five years? Lucas: Well, Indonesia is already talking about a nickel cartel — an opec like body to control prices and supply. That would be a huge shift for the market. Luna: Good luck getting Australia, Canada, and the Philippines to go along with that. But even if it doesn't happen, Indonesia's grip is tightening. Lucas: And the US is trying to push back through the Minerals Security Partnership, a coalition of 14 countries and the EU to fund mining projects in friendly nations. Luna: But those projects take years to come online. In the meantime, the battery makers need nickel now. Lucas: That's the tension. Global automakers want secure, low-cost supply. Indonesia offers both — but at an environmental cost and with geopolitical strings attached. Luna: And the trade data backs up the shift. US imports of nickel have been rising from Indonesia, while exports from traditional partners like Canada have flattened. Lucas: Let's put a number on it. In 2025, Indonesia supplied about 40 percent of the nickel used in US EV batteries — up from almost nothing five years earlier. Luna: That's a rapid shift. And it's not just batteries — nickel is also used in stainless steel, superalloys for jet engines, and even coinage. Lucas: So the question for investors and policymakers is: do you bet on Indonesia's low-cost model, or do you pay a premium for sustainability and diversification? Luna: And for the companies themselves — like Tesla or LG — it's about balancing cost, reliability, and ESG scores. Lucas: One thing is clear: Indonesia has rewritten the playbook for resource-rich countries. They saw what OPEC did with oil and what Chile did with copper, and they adapted it for the battery age. Luna: It's a strategy that other countries are watching closely. We've already seen Zimbabwe try something similar with lithium, and Chile tightening its grip on copper. Lucas: So the lesson might be: if you want to move up the value chain, you need the political will to ban raw exports and the capital to build processing capacity. Luna: Indonesia had both. Their president doubled down on the ban even when the WTO ruled against it — they appealed and kept the policy in place. Lucas: That's a strong signal. It shows that for some countries, industrial policy trumps trade law. Luna: So where does that leave us? The nickel market is now dominated by a single country with a carbon problem and close ties to China. Lucas: For now, the market seems okay with that because the price is right. But if there's a disruption — a political crisis, an environmental crackdown, a shipping bottleneck — the world could face a nickel shock. Luna: And that would ripple through the entire EV supply chain, raising costs and slowing the transition. Lucas: It's a classic resource dependency story, but with a 21st-century twist. Indonesia holds the cards, and everyone else is deciding how to play their hand. Luna: Good place to leave it. Next time, let's talk about what's happening with the yen — it's been hovering around 161 to the dollar, and the BOJ is running out of options. Lucas: That's a whole other can of worms. For now, thanks for listening.