US trade pact offers Indonesian nickel sector China alternative

A US-Indonesia trade deal may not end China's influence on Indonesia's nickel industry but it represents a major step towards diversification in the Southeast Asian nation's nickel downstream sector, according to industry participants and experts.

US President Donald Trump and Indonesian President Prabowo Subianto on Feb. 19 finalized a trade agreement that is expected to facilitate US investment in Indonesia's nickel industry. The deal follows US efforts to secure its own critical minerals supply chain to reduce dependence on China. Companies with Chinese backing controlled 69.9% of Indonesia's nickel refining capacity in 2024, according to S&P Global Market Intelligence data.

While the US is unlikely to topple China's dominant position in Indonesia's nickel sector, the pact provides pathways for Indonesian nickel players looking for alternative sources of capital, industry experts told Platts, part of S&P Global Energy.

"China-linked participation has been central to Indonesia's nickel build-out, and much of that capacity and infrastructure is deeply embedded and will remain important for years to come," said Brandon Colwell, CEO of Indonesia-focused miner Nusa Nickel Corp.

"The more realistic outcome is diversification over time, meaning a broader mix of global counterparties participating alongside existing players," Colwell told Platts.

Chinese assist

Chinese investments helped propel Indonesia to nickel dominance. China-based companies such as Tsingshan Holding Group Co. Ltd. and Zhejiang Huayou Cobalt Co. Ltd. invested in Indonesia's nickel processing industry after Indonesia imposed a nickel ore export ban in 2020. In 2024, Indonesia led the world in nickel production with a 59.0% market share, based on Market Intelligence data.

However, Indonesia's nickel expansion also led to overproduction and lower prices, prompting the nation to introduce measures to cut supply surplus.

In 2025, Indonesia announced that it would only approve new nickel plants for certain intermediate products if the operations undertook further local processing of these materials. The intermediate products include nickel pig iron, matte nickel and mixed hydroxide precipitate.

Indonesia's new smelter restrictions are expected to hinder China's expansion strategy, which, along with the trade deal, has opened a pathway for the US to establish a presence in the Indonesian nickel sector.

"The [trade agreement's] near-term impact is more likely on new projects in the pipeline, as [Indonesia] may tighten expansion of China-backed smelters and adjust capacity plans amid upstream policy uncertainty," Ahmad Zuhdi Dwi Kusuma, an associate principal at the Energy Shift Institute think tank, told Platts.

Competitive landscape

Following the trade deal, capital providers and nickel end-users outside China have increased confidence in sourcing nickel supply from Indonesia, Colwell said.

"[The agreement] may make it easier over time for US-linked industrial buyers, battery supply-chain participants, and institutional investors to engage directly across Indonesia's nickel value chain, from mining through processing," Colwell said.

Headquartered in Toronto, Nusa Nickel produces and trades in lateritic nickel material and intermediate nickel products in Indonesia.

Colwell said he expects the US-Indonesia trade pact to "expand the universe of potential offtake and financing relationships" for internationally aligned producers.

The trade agreement could also serve as a catalyst for Indonesia to strengthen environmental and safety standards in its nickel industry.

"I see this deal as a potential starting point for Indonesia to move toward greener nickel," Zuhdi said. "Especially as the US attaches clear demand that Indonesia must adopt or maintain environmental protections, enforce environmental laws, strengthen environmental governance, and address environment issues linked to non-reciprocal trade."

Uncertainty looms over the trade deal after the US Supreme Court on Feb. 20 struck down Trump's country-specific tariffs. The agreement had set a US tariff of 19% on Indonesian imports and a tariff exemption for 99% of US goods exported to Indonesia.

However, nickel and various other metals had been exempted from the tariffs and the ore is exempted from the new, temporary tariffs Trump imposed in the wake of the recent court decision. The trade deal is also facing backlash from Indonesian civil society groups over sovereignty concerns.

Despite these challenges, the ability of the agreement to establish a competitive landscape for Indonesia's nickel sector is already being seen as a positive development for the industry.

"The deal has potential to make Indonesia's nickel industry less enclave and more diversified, but the shift will be gradual," Zuhdi said.