Prabowo’s Nickel State: Indonesia’s Search for Power

President Prabowo Subianto is trying to convert Indonesia’s nickel dominance into state power. While Joko Widodo’s decade (2014-2024) forced ore onshore and built the processing base, Prabowo now governs the industry that downstreaming created, tightening control across nearly every lever the state holds. Indonesia is a nickel state in formation, leveraging mineral rents the way petrostates leverage hydrocarbons. Mining and quarrying contributed close to 9 per cent of GDP and 17 per cent of export value in 2025.

The conditions for mineral-based statecraft are in place. Indonesia produced 2.6 million tons of nickel in 2025 out of a world total of 3.9 million tons, with the Philippines a distant second (by mine output) at 270,000 tons. Jakarta controls the regulatory stack: ore access, permits, export rules, processing mandates, quotas and royalties. The metal sits at the centre of Indonesia’s broader industrial and electric vehicle (EV) strategy. Every major economy is now negotiating for a place in Indonesia’s nickel and wider critical minerals economy.

Indonesia’s rise took shape in stages. The 2009 Mining Law laid the basis for domestic processing and the 2014 export ban marked the first attempt to force value-added activity onshore. The effort stalled between 2017 and 2019, when smelter capacity had not caught up with policy ambition, forcing partial relaxation. The decisive break came in 2020, when Indonesia banned nickel ore exports. Chinese firms moved fastest to fill the smelter gap: unsurprisingly, since they were already the principal buyers of Indonesian ore and the only investors with nickel pig iron and high-pressure acid leaching (HPAL) capacity to deploy at scale. Indonesia’s share of global nickel supply rose from 31.5 per cent (2020) to 60.2 per cent (2024); Chinese companies or shareholders came to control at least 75 per cent of refining capacity.

Indonesia is a nickel state in formation, leveraging mineral rents the way petrostates leverage hydrocarbons.

Under Widodo, downstreaming strengthened Indonesia’s position, delivering scale, tonnage and processing on Indonesian soil, but technology transfer was limited; operational knowhow and ownership remained with Chinese firms. The structure Prabowo inherited narrowed his administration’s strategic options to extracting more value from the industry as it already runs or deepening domestic capacity (via ownership and technology).

Since October 2024, the administration has worked the first option. A new export proceeds rule requires resource earnings to sit in the domestic financial system, with the US exempted. Higher royalties raise the state’s fiscal take. By shortening quota approvals to a one-year cycle and cutting the 2026 quota from 379 to roughly 270 million tons, Jakarta also tightened supply and pushed nickel prices toward two-year highs. Environmental enforcement and decarbonisation moved ecological impact closer to the centre of sector policy.

While the Jokowi administration was measured, deploying one or two instruments at a time, Prabowo has applied them together, often with little prior consultation: a shift towards direct state intervention and centralised control. Danantara has begun deploying state capital directly into nickel joint ventures. Prabowo has kept China as the incumbent partner while opening parallel channels with the US, Japan and South Korea. On 20 May 2026, Prabowo told Parliament that exports of strategic commodities would be routed through a state-backed body, starting with coal, palm oil and eventually all minerals, partly to address long-standing under-invoicing and revenue leakage.

Table 1. Selected Prabowo-Era Critical Minerals Policy & Investment Signals

Even taken together, these actions do not remove the limits of Indonesian power. Jakarta can set quotas, raise royalties, revoke permits and choose its partners, but it cannot dictate battery chemistry or reshape global demand, nor can it insulate the model it built from internal frictions.

First, the nation’s EV ambition runs into a chemical constraint. Lithium iron phosphate (LFP) batteries made up nearly half of the global EV battery market in 2024 (up from 4 per cent in 2020), contain no nickel and cost around 30 per cent less than nickel-based alternatives. As high-nickel chemistries still dominate long-range EVs, this shift does not make nickel irrelevant but chips away at nickel’s claim to being the indispensable transition metal, at the strategic premium on which Indonesia is counting. In addition, some 83 per cent of Indonesia’s 2025 nickel output went to stainless steel, a reflection of current use rather than a cap on future demand, but a sign that Indonesia’s leverage sits closer to a steel economy organised around China than a global clean energy story. Reserves are large but finite; the window for converting them into a durable industrial position will not stay open indefinitely.

The second set of pressures sits closer to home. The government’s agenda is being announced or legislated much faster than the institutions to operate it can be built. Policy has often shifted without a clear roadmap. In May 2026, the China Chamber of Commerce wrote to Prabowo warning that tighter restrictions were disrupting business operations and eroding investment confidence. Chinese firms own most of the refining base and are affected first, but investors from Japan, the US and beyond, weighing entry into Indonesia, face the same uncertainty. Further, tighter control leaves the boom’s original problems unaddressed, from nickel prices depressed for much of the boom period by overcapacity, to environmental and social costs. Eighteen months into his presidency, Prabowo has taken the first path. The apparatus he is building captures more from existing industry, rather than closing gaps in ownership, capacity and technology. Tighter control buys short-term leverage, but deepens the state’s friction with investors who still operate in the sector and the communities bearing the cost. That friction is unlikely to remain domestic: Indonesia is the choke point through which non-Chinese buyers must secure nickel for the foreseeable future, on the terms the Prabowo administration sets. For now, the administration’s instruments of control are accumulating, as the nickel state remains in formation.

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