Mining Downstreaming Alone Is Not Enough: Indonesia Must Build an Industrial Ecosystem

Jakarta, CNBC Indonesia — Indonesia should not be satisfied with its mining downstreaming programme alone, the National Economic Council (DEN) says. The country needs to build an integrated industrial ecosystem, from factories producing supporting raw materials to the manufacture of finished products that consumers can use domestically.

DEN Executive Director Tubagus Nugraha said the government should now consider industries that support processing and refining. This is particularly important as global geopolitical tensions have risen since the start of the year, driving up prices for several commodities, including sulphur, a raw material used in Indonesia’s nickel downstreaming industry.

With numerous nickel smelters producing battery materials, including High Pressure Acid Leaching (HPAL) facilities that require large quantities of sulphur, reliable sulphur supplies are crucial to the nickel-processing industry.

“Build an ecosystem in which supporting-material industries can develop. Sulphuric acid could be an initial focus in the copper industry. Why? Copper production generates sulphuric acid as a by-product, which can be used to connect the different parts of the ecosystem in North Kalimantan … We will put this ecosystem in order and strengthen its supporting industries,” he said at CNBC Indonesia’s Coffee Morning event, titled “Downstreaming Advances, Mining Industry Grows Stronger?”, according to a report published on Thursday (29 October 2026).

He said Indonesia’s mineral downstreaming exports could reach US$50 billion by the end of 2026, comprising US$32 billion from nickel, US$7 billion from bauxite and aluminium, and US$3 billion from battery materials.

“Even though we do not have lithium, we produce lithium hydroxide and lithium carbonate,” he said.

“Build further capacity and build the ecosystem. Supporting industries and raw materials are the next step. Exporters are now asking whether we can produce sulphur and sulphuric acid domestically,” he said.

“The challenge is to define downstreaming in terms of what we process, but when we talk about industrialisation, we must ask who will use the products. That means creating demand. We need to consider how this can be developed, including data centres,” he said.

“There is a long chain of interrelationships: the longer the value chain, the greater the benefits,” he added.

Dependence on imported sulphur is already threatening the continuity of Indonesia’s nickel downstreaming industry. Disruptions to global supply chains, particularly in the Middle East, could affect the operations of hydrometallurgical nickel-processing plants.

Arif Perdana Kusumah, chairman of the Indonesian Nickel Industry Forum (FINI), previously said that around 75–80% of Indonesia’s sulphur imports in 2025 came from the Middle East. Of total imports of approximately 5.3 million tonnes, the largest share was supplied by countries in the region.

“This highly concentrated supply, following the closure of the Strait of Hormuz, has disrupted — and could cut off — a primary source of raw materials for HPAL refineries in Indonesia,” he told CNBC Indonesia on Thursday (23 April 2026).

Arif said sulphur is critical to nickel downstreaming, particularly in the production of sulphuric acid used in the leaching process at High Pressure Acid Leaching (HPAL) facilities.

“Producing battery-grade nickel in the form of Mixed Hydroxide Precipitate (MHP) using HPAL technology is highly dependent on sulphuric acid,” he said.

The industry requires around 10–12 tonnes of sulphur to produce one tonne of nickel in MHP form, making sulphur one of the largest cost components in HPAL production.

“As the world’s largest producer of nickel-cobalt material (MHP) from HPAL projects, Indonesia is highly dependent on sulphur imports from the Middle East,” he said.