Indonesia’s ban on the exports of unprocessed nickel ore, a key pillar in the chemistry of batteries and other electronics, has fallen foul of international trade rules as the World Trade Organization (WTO) argued the measure does not conform with the country’s “obligations”. 

Exports of unprocessed nickel ore were prohibited in Indonesia in 2014. Separately, the country also introduced domestic processing requirements (DPR) in 2018 that made it compulsory for any company to process nickel ore within the country prior to export.


In 2021, the EU submitted a request to the WTO for the establishment of a panel to examine whether Indonesia’s ban on nickel ore exports and nickel ore DPR requirements breach international trade rules. 

“The idea of such measures was to encourage downstream development in the country and grow revenues from domestic natural resources,” Andrew Mitchell, director of nickel research at consultancy Wood Mackenzie notes. 

The government’s nickel policies are in line with its ambitions to build on the country’s big endowment of nickel resources and become a global electric vehicle (EV) manufacturing hub. 

Indonesia’s investment minister Bahlil Lahadalia tells fDi that the country will be a “major, critical hub for EV battery manufacturing”. He emphasises that the country accommodates “not only the resources, but also the manufacturing and the value-added parts of the value chain.” 

However, the country’s nickel policies have spooked its trade partners. In particular, the EU argued that the export ban is not designed to secure compliance with the relevant laws and regulations identified by Indonesia, but instead to increase the added value of Indonesia's exports, according to the WTO report.

The EU also argued that Indonesia has not demonstrated a relationship between the export ban and the objective of securing the enforcement of rules requiring permit holders to adhere to environmental standards. 


On the other hand, Indonesia argued that the export ban and DPR are measures to secure “compliance with its comprehensive policy framework for mining activities — in particular sustainable mining and mineral resource management requirements”. In this regard, Indonesia noted that soaring demand for nickel presents a greater risk of non-compliance because foreign purchasers do not fall within Indonesia’s jurisdiction. It added that “export demand was met almost exclusively by illegal or poorly regulated mining activities”.

Eventually, the WTO panel backed the EU’s argument, concluding that the two measures are “inconsistent” with the WTO rules, as it cannot see a “positive impact on the sustainability of nickel mining in Indonesia”.

Anton Alifandi, associate director of Asia-Pacific country risk at S&P Global Market Intelligence, does not believe this will affect the Indonesian government’s policies. He notes that “it is likely to continue beyond 2024 when the term of the current administration ends”, based on the success of such restrictive measures and the WTO Appellate Body’s dysfunction. The Indonesian government appealed against the finding to the WTO Appellate Body on December 12.

Mr Alifandi also notes that the restrictions have been “hugely successful”, leading to billions of dollars in inward investment. This includes a $1.1bn EV battery plant led by South Korean heavyweights Hyundai Motor Group and LG Energy Solutions, and a $15bn investment in the EV supply chain made by CATL, the global leader in EV battery manufacturing, and LG Energy Solutions, the second in the industry.

The US Geological Survey said in its 2022 survey that Indonesia has the largest nickel reserves globally, at more than 20%. On top of this, Alistair Ramsay, vice president of energy services at Rystad Energy, notes the demand for nickel is expected to soar with the significant increase in EV investments in the country, and that Indonesia will take China’s crown in nickel processing by 2025.