China Has Sewn Up a Critical Metals Market

China Has Sewn Up a Critical Metals Market

“Big Auto and Big Oil have been in a partnership for a hundred years,” said Tim Sahay, a senior policy manager at the Green New Deal Network. “Now the automakers need to form new partnerships with metal companies.” The electric vehicle boom is underway, and U.S. automakers’ efforts have been turbocharged by the Inflation Reduction Act (IRA). U.S. firms are scrambling to create new relationships and hit production targets—but are often finding that their Chinese competitors have gotten there first.

Metals is a diverse business, but some countries dominate: lithium from Chile, cobalt from the Democratic Republic of the Congo—and for nickel, most roads lead to Indonesia.

Indonesia has 22 percent of global nickel reserves and in 2021 provided 37 percent of the global supply. The Indonesian government has cannily exploited its position. Tariffs and exports bans have helped push companies not just to dig in Indonesia but to process metals there, too.

Battery and car companies, looking to guarantee a steady supply of nickel, are considering getting involved. However, as with lithium and cobalt, Chinese companies already hold a dominant position.

Making up ground will be hard. Chinese metals companies benefit from long-standing relationships with Indonesia. “When Chinese companies are developing assets in Indonesia, there’s a very steady stream of parts and labor and material going from China to Indonesia to enable them to build new assets quickly, on schedule, and on budget,” said Harry Fisher, a project manager at Benchmark Mineral Intelligence.

This efficiency has helped Chinese nickel producers quickly pivot from focusing on nickel pig iron, used for stainless steel, to mixed hydroxide precipitate, or MHP. The vibrant green powder is quickly becoming a preferred feedstock for batteries.

MHP contains both very high-purity nickel and a small quantity of cobalt. Thanks to MHP, Benchmark predicts that by 2030, Indonesia will produce 80,000 tons of cobalt—roughly 20 percent of global production.

Indonesia now has three plants capable of producing 164,000 metric tons of MHP yearly. Some 26 more have been proposed. All—bar three scheduled to open 2026—involve Chinese companies.

The vast majority of MHP produced also seems to be sold—possibly at knockdown prices—to Chinese companies. Intriguingly, the Chinese nickel ore trader Lygend Resources & Technology Co. seems to be the main client of Indonesia’s Harita Nickel and is carrying out a joint venture with Harita at the Halmahera Persada Lygend plant that processes ore into MHP.

Learn more: Foreign Policy icon