8 ways to ensure Indonesia’s nickel sector is sustainable

• Since a 2020 law ordering the processing of mining commodities into more valuable, marketable products (downstreaming), Indonesia’s nickel production and export have surged sharply.
• However, controversies surrounding Indonesia’s nickel sector are difficult to ignore.
• Additionally, the tumult caused by Indonesia’s nickel export ban, which led to a 2021 lawsuit at the World Trade Organization, and the collapse of nickel prices due to oversupply have been notable.

• As the world’s largest nickel producer and reserve holder, according to data from the United States Geological Survey, downstream processing is seemingly inevitable for Indonesia.
• Here are eight crucial aspects to consider to ensure Indonesia’s nickel sector’s environmental and economic sustainability.

1. Realigning the nickel industry narrative

• For instance, the narrative around nickel downstreaming, heavily promoted by Jokowi, is often linked to Indonesia’s ambition to become a global EV battery producer.
• In reality, 70% of Indonesia’s nickel is absorbed for stainless steel production, a primary material for items from kitchen utensils to skyscrapers and wind turbines.
• According to Adhiguna, the nickel industry’s strong narrative for EV battery development hinders a comprehensive discussion of its economic and environmental sustainability.

2. Incentives for decarbonisation and waste management

• At the upstream level, emissions arise directly and indirectly from mining equipment and the energy needed for processing).
• Hydrometallurgy – the extraction of nickel with chemical solutions mainly used for producing battery raw materials – generates waste that risks polluting water and soil.
• “From the government itself, I believe there must be incentives for emission reduction,” he asserted.

3. Pressures from consumers

• Indonesian nickel consumers can also play a significant role in demanding sustainable mining and processing practices.
• For instance, Indonesian nickel product users could adopt the European Union’s policy requiring bioenergy only from sustainably managed sources free from deforestation.
• According to him, the most feasible demands for sustainable nickel could come from producers and consumers of electric vehicles and their components, such as batteries.

4. Limiting expansion

• Adhiguna believes restricting the industry’s expansion is a viable solution to address environmental impacts, preserve reserves, and rectify the plummeting nickel prices in the market.
• Nickel ore production is affected by the demand for processing facilities and limiting the number of smelters would gradually improve nickel ore prices.

5. Strengthening exploration and nickel reserve data

• The Indonesian Nickel Miners Association (APNI) stated earlier this year that Indonesia’s high-grade nickel ore reserves, mainly used for steel production, would be depleted within six years.
• Although the government has refuted APNI’s statement, it underscores that Indonesia’s nickel is finite.
• Gani also emphasised the importance of reducing environmental impacts starting from the exploration stage of mining.

6. Evaluating export bans, strengthening cooperation

• Given the unclear trajectory towards EV (with nickel batteries), it’s worth considering whether these incentives are sustainable,” he added.
• Gupta also recommended that the government strengthen international nickel supply chain cooperation rather than impose export bans, which do not always benefit Indonesia.
• Almost 90% of Indonesia’s nickel export is shipped to China.

7. Drafting a comprehensive roadmap

• With China currently experiencing an oversupply of electric batteries, Adhiguna reiterated how important it was for Indonesia to have a far-reaching roadmap for its nickel ambition.
• Meanwhile, Gupta believes Indonesia needs to reassess how far investor interest in developing nickel downstreaming extends.
• After all, nickel is widely used in everyday life, from kitchen utensils and electronic equipment to supporting various industrial sectors.

8. Sustainable mining practices

• By integrating the aspects mentioned above, according to Gani, it’s time for sustainable mining practices to serve more than just a slogan, applied with tightened oversight from the government.
• Indonesia could emulate countries that have successfully implemented sustainable practices, such as Canada with its biomass-powered mining energy sources.