China-Indonesia Nickel Dominance Fears Following LME Listing

News that the London Metal Exchange (LME) has approved the listing of the first Indonesian nickel brand is seen by many as an ominous moment in Indonesia's growing China-backed influence on the global nickel market.

The LME has approved the DX-zwdx brand of full-plate nickel cathode produced by Indonesia's PT CNGR Ding Xing New Energy, a joint venture involving Chinese energy material company CNGR. The cathode approach means the nickel is refined by electrolysis to a purity of approximately 99.8%. The plant has an annual capacity of 50,000 metric tons.

Indonesia has become a powerhouse of global nickel production in recent years but until now has not produced significant amounts of the metal in the high-purity form traded on the LME, the world's largest and oldest metals trading venue.

Reuters reports that for many nickel producers, the PT CNGR Ding Xing New Energy listing is an ominous moment in Indonesia's growing China-backed influence on the global nickel market.

Other Chinese nickel operators are also building out similar new processing capacity, both in Indonesia and China.

The LME has already approved four new Chinese brands with another application pending. They bring a collective 91,600 metric tons of annual Class I metal capacity, says Reuters. 

2022 nickel slump engineered by China & Indonesia

This follows the nickel price of 2022 slump engineered by China, which put nickel operations around the world – particularly in Australia – in jeopardy. 

This caused the closure of many Australian nickel mines, and has led to high-level discussions in Australia about diversifying its critical minerals strategy and rethinking its partnerships. 

The slump was caused by a huge oversupply of cheap, low-grade nickel pig iron from China and Indonesia. Together, the two countries produce around 70% of the world’s nickel. In 2023, Indonesia alone accounted for around half of global production in 2023, which is expected to rise significantly by the end of the decade. Nickel is a vital component of EV batteries 

Australia has now reworked its laws governing foreign investment in the domestic processing of clean-energy resources, a move aimed at consolidating its role as a global player in the energy transition. 

At the centre of the policy is Australia’s desire to tighten scrutiny of foreign investment in the mining and refining of critical minerals.

The move is a thinly veiled attempt at negating China’s attempts to secure a tighter grip on the critical minerals market, particularly lithium, which is vital for the manufacture of EV batteries.

Indonesia, with China’s backing, blindsided Australia to become the world's top refined nickel producer, after it spent a decade banning raw nickel exports in a bid to make itself a major producer of processed nickel. This saw it move up the supply chain and vastly increased the value of its nickel exports.