Chinese dominance in nickel refining puts US and European EV makers at a disadvantage amid stricter trade policies with China. Credit: AfinaZahra/Shutterstock.

Chinese companies currently control 75% of Indonesia’s nickel refining capacity, raising concerns about supply chain resilience, according to a report by US-based global security non-profit the Center for Advanced Defense Studies (C4ADS).

The ownership by Chinese companies can potentially impact global supply chains for the critical component used in electric vehicle (EV) batteries, according to the report.

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Global demand for nickel is expected to surge from around three million tonnes (mt) in 2023 to between 5mt and 6mt by 2040, primarily due to the expansion of clean energy technologies.

In 2023, Indonesia and China together produced 65% of the world’s refined nickel.

From 2020 to 2023, Indonesia’s portion of the worldwide refined nickel market increased from 23% to 27%, primarily as a result of raw nickel export bans implemented in 2014 and 2020.

However, much of this capacity is foreign-owned, with 33 companies holding Indonesia’s 8mt refining capacity.

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Shareholder overlap tracing revealed that Chinese companies control around three-quarters of this smelting capacity as of 2023.

The report found that Tsingshan Holding Group and Jiangsu Delong Nickel Industry, two Chinese companies, account for more than 70% of Indonesia’s refining capacity as of 2023. This ownership concentration raises concerns about industry dominance.

Moreover, by 2030, Indonesia is projected to account for 44% of global refined nickel production.

“As Indonesia aims to use the nickel industry for economic growth, this substantial foreign influence could limit its ability to control and shape the industry for its benefit,” the report added.

The dominance of Chinese companies in this sector places US and European automakers at a competitive disadvantage in the global EV market, especially amid increasingly restrictive trade policies with China, the report said.

In an effort to make Indonesian nickel more accessible to the US market, Chinese companies have approached Indonesian and South Korean companies for potential partnerships to reduce their stakes in smelters, reported Reuters.

Tsingshan has begun selling stakes in some of its smelters, including a 30% share of PT Jiu Long Metal Industry to Indonesian state miner Aneka Tambang in October.

Indonesian Mining Minister Bahlil Lahadalia stated last month that President Prabowo Subianto has formed a task force to develop the downstream mineral industry through domestic financing, aiming to “gradually reduce the perception that foreigners got the most benefits”, according to Reuters.