News , | 11/14/2025 : A Harmful Transition: Nickel Mining in Indonesia

Introduction 

With more than half of the nickel mined worldwide, Indonesia was by far the largest producer in 2023. Growing concerns over climate change and the ‘green transition’ to renewable energy sources have seen an increasing demand for nickel, which is primarily used in stainless steel production and as a vital component in lithium-ion batteries for electric vehicles (EVs). Yet, mining and processing practices have caused serious social and ecological harm such as deforestation, habitat destruction and displacement, as well as impoverishment of local communities.

The German government and several German companies, such as the car company Volkswagen (VW), have shown interest in nickel production in Indonesia, especially for the growing market of EVs and, therefore, the green mobility transition in Germany. This creates the paradoxical situation in which the German energy transition is an example of the broader dynamic in which the Global North consumes ‘clean energy’ while the Global South extracts the necessary resources and bears the resulting social and environmental consequences.

Economic ties between Germany and Indonesia are particularly significant in the realms of renewable energy and critical raw materials, with Indonesia playing a pivotal role in diversifying Germany’s access to resources like nickel. Beyond the German interest Beyond the German interest in trade relations with Indonesia, the two countries have longstanding energy and development partnerships. The Just Energy Transition Partnership (JETP) – financial mechanisms that kick-start fossil fuel phase-outs in several countries  - launched in 2022, plays a pivotal role in this collaboration, with Germany stepping in as co-lead following the U.S. withdrawal in February 2025.

Recently, Germany and the European Union (EU) issued a due diligence directive aimed at preventing business operations from contributing to human rights violations and environmental harm. However, as we will demonstrate, the case of Indonesian nickel mining reveals significant gaps in implementation, rendering this legislation impotent when compared to fostering energy partnerships based on the premise of justice.

The struggle over nickel extraction in Indonesia, particularly its framing as essential for advancing a green energy transition and sustaining economic growth in the Global North, serves as a striking example of the rise of green capitalism and the (re)production of colonial continuities. Specifically, the green financialization of critical raw materials and the emerging geopolitics of Germany and the EU are intrinsically tied to the perpetuation of historical patterns of exploitation for economic gains. At the same time, Germany is upholding its pledge to economic solidarity and ‘partnerships of equals’ and the due diligence laws theoretically aim to prevent human rights violations and ecological harms along global supply chains. Amid these contradictions, the study provides an overview of nickel mining and processing in Indonesia, including its structural context and impacts, in order to assess how far German engagements in Indonesian nickel production resemble and renew neocolonial dynamics.

 

Nickel Mining and Processing in Indonesia 

Indonesia has become the geographical heart of global nickel mining. Its share of mined nickel increased from 34 percent to 52 percent, and its share of refined nickel from 23 percent to 37 percent between 2020 and 2023. Yet, the ownership of the mining companies lies mostly outside the country. Less than 10 percent of total production is held by Indonesian companies, while Chinese companies are the major owners with around 40 percent of production. European companies own a share of around 20 percent, mostly due to the French mining company Eramet.

Nickel mining in Indonesia is concentrated in Sulawesi and the North Moluccas, specifically Halmahera and Obi. Here, nickel is mostly mined and refined in big industrial parks. The largest parks are IMIP (Indonesia Morowali Industrial Park) on Sulawesi and IWIP (Indonesia Weda Bay Industrial Park), North Moluccas. Both are Chinese-Indonesian joint ventures, with the Chinese company Tsingshan, the world’s largest stainless-steel producer, being the dominant partner. In 2022, around 22 percent of the worldwide refined nickel was produced here.

 

The Quest for Nickel as a Strategic Mineral  

United Nations Secretary-General António Guterres aptly remarked, “A world powered by renewables is a world hungry for critical minerals”. This highlights the paradox of ‘green energy systems’: the pursuit of sustainability through renewable energies while maintaining socially and environmentally destructive practices in the mining of critical raw materials. Engagement in energy transformations not only refers to Germany’s responsibility to support an Indonesian energy transition via bilateral cooperation and mechanisms like JETP but should also involve considering the indirect environmental and human rights impacts of the German energy transition in countries like Indonesia.

Germany’s approach to raw material sourcing reflects a broader policy trajectory shaped by Critical Raw Material Acts. The 2010 German Raw Materials Strategy prioritized economic interests over ethical considerations, neglecting accountability for human rights and environmental standards in foreign resource extraction, said an NGO representive in an interview in 2024. Similarly, the EU Critical Raw Materials Act (CRMA) identifies nickel as one of 17 ‘strategic minerals’ essential for green transformation, particularly for EV battery production. However, the CRMA’s objective of processing 40 percent of ores within the EU directly contradicts the principle of fostering ‘partnerships of equals’ with supplier countries like Indonesia. Shifting value chain activities from Indonesia to Europe undermines economic solidarity and perpetuates structural inequalities. 

The CRMA attempts to address sustainability through certification mechanisms like the Initiative for Responsible Mining Assurance (IRMA), which promotes standards for environmental and social governance. However, critics argue that such mechanisms risk enabling ‘greenwashing,’ masking ongoing human rights abuses and ecological harm. Furthermore, their reliance on industry-driven standards often excludes the voices of those most impacted by mining activities, reinforcing neocolonial patterns of exploitation.

Indonesia’s response to these dynamics, under former President Joko Widodo (2014-2024), sought to assert sovereignty over its resources through policies like the export ban on raw nickel in 2014 (renewed in 2020). Until then, almost all nickel was exported in an unprocessed state to China. The ban increased domestic value retention but led to tensions with the EU. These measures have driven up global nickel prices and sparked tensions with the EU, which views such restrictions as barriers to free trade, and thus a violation of the General Agreement on Tariffs and Trade (GATT).  While the World Trade Organization (WTO) ruled against Indonesia’s restrictions following the EU’s claim, the lack of a quorum at the WTO Appellate Body has delayed the appeal process indefinitely.

While the EU negotiates a free trade agreement with Indonesia (IEU-CEPA), which risks undermining Indonesia's economic sovereignty, Germany has pursued bilateral ties, exemplified by establishing a Joint Committee on Economic and Investment Affairs at the Hannover Messe 2023. The committee aims to strengthen economic cooperation, particularly in the fields of raw materials and renewable energy, and also includes business representatives. This cut-throat competition over nickel to win the race of a ‘green transition’ cannot be classified under a partnership of equals but instead reinforces the capitalization of sustainability and justice, thereby perpetuating global power relations and inequalities.

 

Accountability, Transparency and Effectiveness in Regulating Supply Chains 

In 2021, the German government adopted the Lieferkettengesetz (LkSG). It came into force in January 2023 and applies (since 2024) to companies based in Germany with at least 1,000 employees. In July 2024, the European Union followed suit with the Corporate Sustainability Due Diligence Directive (CSDDD). Both frameworks represent important steps toward enforcing corporate responsibility in global supply chains, but face significant limitations and systemic challenges, particularly in complex and opaque supply chains like those related to nickel. 

The LkSG has been criticized for loopholes, such as the absence of civil liability provisions and its narrow focus on direct suppliers, leaving indirect actors often unaddressed. However, the law includes complaint mechanisms to report human rights violations within the operations of indirect suppliers. Such reports can compel German companies to conduct risk assessments and assume due diligence responsibilities if substantiated knowledge of risks exists. Yet, in practice, these mechanisms remain challenging to implement effectively, especially in intricate supply chains involving numerous intermediaries and insufficient transparency.

Moreover, the Federal Office for Economic Affairs and Export Control (BAFA), tasked with overseeing corporate risk analyses and handling complaints, only has administrative enforcement powers, rendering these mechanisms largely symbolic. Additionally, affected communities face barriers such as limited access to information, legal expertise, and financial resources, while companies exploit legislative ambiguities to delay or dismiss complaints. Companies cannot effectively utilize data repositories or risk categorizations without comprehensive knowledge of their supply chains. Transparency forms the bedrock of effective due diligence, and BAFA’s focus on this aspect could significantly enhance corporate accountability.

At the same time, regulations largely overlook external costs generated by many actors beyond the directly involved companies. As rightly highlighted in the CSDDD, the assessment must not stop with the companies themselves. Still, it should encompass all actors along the supply chain, such as banks that provide credit to these companies. Prioritizing domestic improvements in mining, processing, and recycling without ensuring accountability throughout the entire supply chain is insufficient and risks perpetuating structural injustices and social-ecological losses and damages.

 

German Companies and Indonesian Nickel  

The German car industry is mostly indirectly tied to Indonesian nickel production through battery supply contracts. Volkswagen (VW), for example, lists Indonesia as one of its principal nickel supplier countries.

Generally, direct and indirect entanglements of German companies and their subsidiaries in Indonesian nickel production are characterized by a lack of transparency and are thus difficult to trace. In response to a recent question (Kleine Anfrage) by Die Linke parliamentarians, the German Federal Ministry for Economic Affairs and Climate Action (BMWK) claimed that it had no knowledge of activities by German companies in the context of nickel mining in Indonesia.

Yet, it is known that BASF and Volkswagen (VW) were planning to invest directly in nickel mining and processing facilities in Indonesia. Together with Eramet, BASF was about to finalize a 2.6 billion US dollar investment deal under the so-called ‘Sonic-Bay-Project’ in IWIP, a 5,000 hectar industrial park in North Moluccas, with 24,000 employees. Here, BASF wanted to produce nickel and cobalt as cathode materials for lithium-ion batteries in electric vehicles. The refinery complex that the companies jointly planned to build was on land also partly used by one of Indonesia’s last five nomadic living Indigenous communities, the ‘Orang Tobelo Dalam’ (also called ‘O’Hongana Manyawa’). It is assumed that, to date, between 300 and 500 people of this group remain ‘uncontacted’. In June 2024, BASF announced its decision to withdraw from its investment in Weda Bay, citing significant changes in the global nickel market since the project’s inception. According to BASF, these developments have notably enhanced supply options and the availability of battery-grade nickel.

VW has expressed interest in investing in nickel ore processing through its subsidiary company PowerCo and started to conduct a feasibility study for the establishment of 5 billion US dollar electric vehicle battery plant in 2023, thereby collaborating with several national and international companies. According to VW’s Responsible Raw Materials Report, “PowerCo entered purchasing agreements with suppliers of battery raw materials that will begin supplying PowerCo in 2025” and claims that it “joined IRMA in 2022 and has since rolled out the IRMA standard across the battery supply chains through contractual obligations”. According to VW, however, challenges remain in the nickel supply chain because many mining companies are new to IRMA and often prefer alternative standards.

 

Unearthing Injustices: The Social and Environmental Losses and Damages of Nickel Mining in Indonesia 

Nickel mining and processing in Indonesia is carried out in huge industrial parks, with significant adverse environmental and social impacts. IMIP on Sulawesi, for example, the first and biggest nickel park, established following an agreement between ex-President Yudhoyono and Xi Jinping in 2013, is ten times bigger than New York Central Park. It hosts more than 54 factories and 46 smelters and employs more than 100,000 people. Altogether, until 2022, concessions for more than one million ha were given out for nickel mining, around 75 percent in forest areas.

Open-pit mining is the common method used to extract nickel, leading to deforestation. The WWF study “Extracted Forests” found that Indonesia currently has the highest mining-related deforestation rate worldwide. In the cases of Halmahera and Obi, deforestation also affects primary rainforests. This further leads to habitat destruction and soil erosion, the disruption of local ecosystems and decreased biodiversity.

Nickel mining also has tremendous socio-economic effects on surrounding communities. Deforestation increases flooding and local communities lose access to forest resources. Soil erosion following deforestation leads to higher cloudiness of rivers and coastal waters, affects the quality of the sea, and leads to lower productivity for local fishers. Pollution and access restrictions force fishers to look farther from shore for their catch, making fishing much less profitable and significantly reducing their income. Moreover, mining operations result in the pollution of soil and waterways due to the leaching of heavy metals and other harmful substances, adversely affecting the health of surrounding communities and their access to clean water.

The smelters used for processing the nickel are coal-based, leading to a high CO₂ intensity of Indonesian nickel production and local air pollution. This phenomenon reveals a stark double standard: while Germany’s energy and mobility transition is heralded as a ‘green’ transition, CO₂ emissions are outsourced, leading to increases in countries like Indonesia. The externalization of ecological costs to sustain a ‘green’ image in the Global North exacerbates global injustices, thereby perpetuating neocolonial dynamics. 

The rapid expansion of nickel mining has also led to conflicts over land use, with Indigenous and local populations often facing displacement or loss of livelihood as mining companies assert control over land traditionally used for agriculture or cultural practices. In Halmahera, companies have not complied with free, prior and informed consent procedures. Affected communities report they have received either no or very little compensation for the impacts they have been suffering. In Halmahera, there were also reports of conflict with indigenous nomadic groups who have been displaced from their traditional lands and forests. Protests against the mining companies were violently suppressed by brimob brigades and other ‘security’ personnel.

Nickel mining’s gender-specific impacts also warrant attention. The described loss of livelihoods, in combination with the presence of many relocated cis-male workers from other parts of Indonesia and abroad, has disproportionately driven women into sex work to support their families. This underscores the intersectional nature of socio-economic harms caused by mining activities, amplifying existing vulnerabilities of affected communities. Furthermore, inadequate labour standards persist in Indonesia’s nickel parks. Payment is relatively low, with approximately 500 million Rupiah (around 300 Euro) monthly wage. There have been reports of significant work accidents in the industrial park on Sulawesi. A documentary on the “bloody nickel” in Indonesia states that between 2015 and 2023, 64 nickel mining and processing site workers died. Workers who became active in workers’ unions and strikes have been dismissed from their jobs, and protests have been repressed. 

The largest share of the workers comes from other parts of Indonesia. Yet, there is also a significant number of Chinese workers. The unequal treatment of workers in Indonesia’s nickel mining sector exacerbates social tensions. For example, one actor from a local civil society organization reported that better-paid jobs are often reserved for Chinese workers, while local Indonesian workers face discrimination, including safety warnings written only in Mandarin, leaving many unable to understand critical safety measures. However, while they get paid more than their Indonesian colleagues, Chinese workers’ working conditions have been reported to be even worse, with conditions resembling modern forms of slavery.

Conclusion 

Nickel mining in Indonesia, driven by the country’s vast reserves and the growing global demand for critical minerals used in electric vehicle batteries, has become pivotal to the German and European ‘green transition’. However, this industry often incurs severe environmental and social costs, including deforestation, pollution, and the marginalization of local and Indigenous communities, perpetuating historical patterns of neocolonial exploitation. Mechanisms such as LkSG and the CSDDD aim to address parts of these challenges by promoting sustainable practices and protecting human rights across supply chains. Yet, the narrow scope of these regulations, which focus primarily on direct supply chains while neglecting broader systemic impacts, fails to hold corporations accountable for the full social and ecological footprint of nickel extraction. Instead, these regulatory gaps allow exploitative practices to persist, which externalize socio-ecological costs onto resource-rich countries like Indonesia and further entrench the economic and environmental advantages of the Global North at the expense of the Global South.      

Indonesian activists thus demand strengthened protection of the environment, biodiversity, and the rights of local communities and workers. They claim that nature should not be commodified and extracted for mining and that the biodiversity of Halmahera and other mining regions should be recognized and valued rather than just focusing on the resources that may be extracted to foster economic growth. Moreover, they demand that extractive industries be held accountable for the severe environmental damage they cause, both in the present and future. Furthermore, they stress the importance of justice and fairness, as the presence of the mining companies has coincided with violations of rights to free and prior informed consent, while at the same time, affected local communities have been largely excluded from the benefits related to nickel mining.

To reduce the harm caused by nickel mining in Indonesia, companies and governments of the Global North, including Germany, should:

• Advocate for a fundamental shift from expanding extractive industries to reducing resource consumption and establishing a circular economy.
• Implement and uphold stringent standards across the entire supply chain
• Companies should monitor their suppliers and conduct regular audits to ensure adherence to existing international conventions, such as the ILO Convention for the Protection of the Rights of Indigenous Peoples, the Supply Chain Due Diligence Act, and the Action Plan for Business and Human Rights.
• Develop genuine energy partnerships that go beyond transactional trade agreements, actively supporting the economic sovereignty of partner countries like Indonesia, and fostering relationships based on equality and mutual respect.
• Commit to eliminating paternalistic attitudes and neocolonial behaviors in resource extraction, recognizing and respecting partner countries as equal and autonomous, and ensuring fair treatment in all matters.