The speed of change has astonished even close nickel-watchers. Just a few years ago, the dominant belief was that the move to electric vehicles would sustain roaring demand for high-purity battery-grade nickel, notes Bernard Dahdah of Natixis, a French bank. Even as Indonesian supply increased, hitting the market for lower-grade nickel used in stainless steel, few thought the high-end nickel market was exposed. This is because while traditional nickel producers like Australia have easily-processed “sulphide” ore deposits, Indonesia’s are “laterite” deposits, wherein nickel is finely sprinkled throughout the sediment. These are harder to refine and, many thought, would be too expensive for mass-producing nickel fit for batteries.

But more recently firms in Indonesia, led by Tsingshan, a Chinese metals giant, have worked out how to efficiently turn nickel laterites into the purer stuff. Their techniques have been innovative. One popular method dissolves ore in hot, pressurised acid to produce “mixed hydroxide precipitate” (MHP), an intermediate ingredient that is then made into battery-grade nickel. Likewise “nickel matte”, another intermediate, is alchemised from low-grade nickel. These have transformed the high-end nickel market. Nearly three-quarters of battery-grade nickel is now derived from matte and MHP, up from 40% four years ago. The shift is almost wholly attributable to Indonesia, says Andrew Mitchell of Wood Mackenzie, a consultancy.

However, Indonesia is reeling from its own success. Having nabbed market share with cut-price nickel, it must now turn a profit. The government is trying to rein in its nickel smelters. “The state must be present to maintain supply and demand,” Bahlil Lahadalia, the energy and mineral resources minister, said on October 18th. Indonesia has tightened nickel-ore quotas and cracked down on illegal mining. There is a domestic ore shortage. Ore shipments have fallen by more than a third this year, according to Jim Lennon of Macquarie, a bank. Imports of nickel ore, mainly from the Philippines, have hit records. The combination of high ore prices and low processed-nickel prices is pinching smelters. Some foreign firms are scaling back or pulling out. Tsingshan has cut back production. In June Eramet and BASF, two European mining giants, cancelled a $2.6bn investment in North Maluku.

But while Indonesia may see sense in market management, the broader policy of downstreaming is unlikely to change. It is credited for recent high-profile investments. In July Joko Widodo, the outgoing president known as Jokowi, attended the opening of a $1bn EV battery-cell factory built in West Java by Hyundai and LG, two South Korean firms. Prabowo Subianto, the new president, has retained many of the personnel responsible for downstreaming, notes Siwage Dharma Negara, an Indonesia-watcher. Chief among them is Luhut Pandjaitan, a retired general who, as a minister under Jokowi, was instrumental in co-ordinating Indonesia’s bureaucracy. (Mr Prabowo has kept Mr Luhut on in an advisory role.) The investment minister has been renamed the minister of investment and downstreaming.

There also exist plans to expand export bans to new commodities, such as seaweed. Bauxite exports were banned in 2023 and palm-oil ones in 2022. Mr Bahlil, re-appointed by Mr Prabowo, has praised the policy as one key strategy “to transform [Indonesia] from a developing into a developed country”. Speaking at his inaugural address, Mr Prabowo did not mince his words: “All our commodities must be enjoyed by all Indonesians.”