Mineral downstreaming is one of Indonesia\u2019s most ambitious economic\nagendas. It began with the 2009 Mineral and Coal Law, which mandated the\nconstruction of smelters and prohibited the export of raw ore,\neffectively coming into force in 2014.<\/p>\n
More than a decade later, these efforts have shown results: 53\nsmelters for nickel, bauxite, copper, and tin are already operational,\nwith no fewer than 100 more in the construction and planning phases\n(Ministry of Energy and Mineral Resources). In the first half of 2026\nalone, the value of mineral downstreaming investment reached IDR 206.5\ntrillion.<\/p>\n
Given these initial results, there is no reason not to continue the\ndownstreaming agenda. However, \u2018continuing\u2019 here must be interpreted\nliterally: processing minerals further into the mid-stream and\ndownstream sectors.<\/p>\n
There is no need to repeat the pattern used for almost all mineral\ncommodities, which is to attract as much smelter investment as possible.\nWhile this pattern has provided significant economic benefits, it is\nreaching its limits due to environmental and social impacts, as well as\nthe rapid depletion of mineral reserves and resources. Efforts towards\nfurther processing have already shown early success.<\/p>\n
Nickel is a prime example; its production chain has now reached\nbattery manufacturing. For instance, PT HLI Green Power\u2019s Nickel\nManganese Cobalt (NMC) battery cell production facility in Karawang is\noperational with an initial capacity of 10 GWh per year, equivalent to\nthe needs of approximately 150,000 electric vehicles. Nevertheless, this\nadvanced downstreaming effort requires a more complex strategy than\nmerely attracting smelter investors.<\/p>\n
Challenges Towards Manufacturing<\/p>\n
Currently, about 71% of Indonesia\u2019s nickel utilisation is directed\ntowards the stainless steel industry, while nickel\u2019s contribution to the\nbattery industry is only around 3% (Indonesia Mining Association). This\nindicates that in the case of nickel, the strategy of attracting smelter\ninvestment is approaching a point of saturation.<\/p>\n
Although the purification and smelting of raw ore by smelters\nproduces pure metals or semi-finished products, the value chain still\nstops midway, without automatically moving up to the midstream or\ndownstream products.<\/p>\n
One of the main challenges is that despite possessing vast mineral\nresources, Indonesia still lags in the technology required for further\nprocessing. Consequently, almost all large-scale smelter projects must\npartner with foreign technology providers.<\/p>\n
In the case of nickel, precursor cathode active material (pCAM) and\ncathodes\u2014two crucial links in the battery chain\u2014still need to be built\nfrom scratch (Ministry of Investment and Downstreaming). A similar\npattern exists where downstream chains do not automatically follow\nsmelter production, which also threatens other minerals whose\ndownstreaming has only just begun.<\/p>\n
The Running Hourglass<\/p>\n
The Indonesian government appears to have realised that in the\nfuture, the success of inviting more smelters does not fundamentally\nequate to the success of continuing downstreaming. Repeating the old\nstrategy on a larger scale will deplete non-renewable natural resources\nwithout ever truly moving up the production chain.<\/p>\n
This hourglass is indeed running, at least for nickel. The Ministry\nof Energy and Mineral Resources estimates that the national nickel\nreserve of approximately 5.9 billion tonnes could be exhausted within 11\nyears if the production rate continues to follow the proposed Work Plan\nand Budget (RKAB) of companies, which in 2025 alone reached 490 million\ntonnes.<\/p>\n
It is unsurprising that for 2026, the government only approved nickel\nore RKAB in the range of 260 million tonnes. Some established smelters\neven have to import additional nickel ore from the Philippines, a fact\nthat further demonstrates the imbalance between the speed of the\nsmelting process and the sustainability of mineral reserves and the\neffort to extend the value chain through downstreaming.<\/p>\n
The risks of this old pattern are no longer hypothetical; it is not\njust about nickel or a sectoral issue, but is becoming visible in\nregional development. The economic growth of West Nusa Tenggara (NTB)\nrecorded declines of -0.5%, -1.47%, and -0.82% (y-on-y) in the fourth\nquarter of 2024 and the first and second quarters of 2025 (BPS)\nfollowing the cessation of concentrate exports and the temporary closure\nof PT Amman Mineral\u2019s copper-gold smelter in Sumbawa.<\/p>\n
This situation demonstrates the risk of regional economic dependence\non mining and raw processing activities. Similar indications are being\nexperienced in other smelter operating areas such as Sulawesi and North\nMaluku. The local economic momentum that once emerged\u2014among small\ntraders, contractors, and drivers\u2014is vulnerable to the depletion of\nreserves or a drop in global prices.<\/p>\n
Advanced Strategy<\/p>\n
Fiscal incentives and ease of licensing, which have traditionally\nfocused on attracting new smelters, need to become more selective, both\ndue to the aforementioned \u2018hourglass\u2019 risk and the narrowing of the\nstate\u2019s fiscal space. A different policy architecture is required,\nfocusing on three main prerequisites.<\/p>\n
First, fiscal and non-fiscal incentives should be specifically\ndirected towards encouraging investment in midstream manufacturing and\ndownstream products. This could be achieved through tiered incentives\nthat are larger for facilities producing Precursor Cathode Active\nMaterial (pCAM), cathodes, and battery cells for nickel, with a similar\napproach for other mineral commodities once their smelting stage has\nmatured.<\/p>\n
Projects such as the planned US$350 million investment by Pure\nBattery Technologies for a pCAM facility in Batang, or the three High\nPressure Acid Leach (HPAL) facilities by PT Vale Indonesia targeted for\ncompletion by the end of 2026, are early examples of this direction.\nHowever, these examples are still too few and remain too dependent on\nindividual corporate initiatives.<\/p>\n
Second, technology transfer must be made a binding requirement in\nevery\u2026<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/continuing-the-downstreaming-agenda-from-smelting-to-manufacturing-1790682846", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }