---
title: "Nickel and Coal: Indonesia Is Setting Its Own Terms"
description: Jakarta cut nickel mining quotas by a third and walked back a major coal phase-out commitment, signalling that resource-rich nations will not wait for the trading order to be rewritten around them.
author: Darie Nani (Editor-in-Chief)
date: 2026-02-18T18:32:33.000Z
updated: 2026-02-26T17:55:07.347Z
canonical: https://www.sovereignmagazine.com/article/nickel-and-coal-indonesia-is-setting-its-own-terms
image: https://cdn.nanimediahouse.com/indonesia-nickel-coal-mining.webp
categories: Supply Chains
content_type: News
region: Indonesia
publication: Sovereign Magazine
---

Indonesia cut its 2026 nickel mining quota by 34 per cent and reversed the planned closure of its flagship coal plant within months of each other. Both decisions point in the same direction: Jakarta is prioritising domestic economic leverage over international commitments.

## Nickel quota cut by a third

The Ministry of Energy and Mineral Resources set the 2026 nickel ore quota at 260–270 million wet metric tonnes, down from 379 million in 2025. The approval system has reverted to annual sign-off, giving Jakarta direct control over how much ore reaches the market each year. PT Vale Indonesia, one of the country’s largest miners, was forced to halt operations in January after failing to secure its 2026 approval.

Indonesia supplies roughly 60 per cent of global nickel (up from 31.5 per cent in 2020) and has banned raw ore exports since that year. The quota cut has already pushed nickel prices to a [15-month high](https://discoveryalert.com.au/nickel-market-rally-2026-economic-indicators/). President Prabowo Subianto’s broader resource nationalisation campaign has brought more than four million hectares of plantations, mine concessions and processing facilities under state control since March 2025.

## Coal plant reversal

The Cirebon-1 coal plant (660MW, operating since 2012) was the test case for the $20 billion Just Energy Transition Partnership, a 2022 deal between Indonesia and a group of wealthy nations to fund early coal retirement. The plant was scheduled for closure by 2035. In December, Jakarta reversed the decision, citing uncertain replacement funding and the plant’s efficient supercritical technology.

Of the $21.8 billion pledged through JETP, only around $3.4 billion has been made available. The United States [withdrew from the partnership](https://news.mongabay.com/2026/01/indonesia-backs-away-from-coal-exit-test-case-amid-financial-and-political-pushback/) last year. Germany and Japan now co-lead.

## Trade concessions, resource control

These moves sit alongside a separate set of trade negotiations. The United States imposed a 32 per cent tariff on Indonesian exports last year (later negotiated down to 19 per cent). In response, Jakarta removed tariffs on 99 per cent of American imports, pledged [$15 billion in US energy purchases and $4.5 billion in agricultural imports](https://rsis.edu.sg/rsis-publication/idss/ip25077/), and lowered local content requirements from 40 per cent to 25 per cent.

Indonesia is making trade concessions to the US while tightening its grip on the commodities the global [energy transition depends on](https://www.sovereignmagazine.com/article/battery-wars-battle-for-dominance-in-sustainable-energy-storage-heats-up). The pattern is not unique to Jakarta. When the rules of the trading order are being rewritten by the largest economies, resource-rich nations with leverage (whether in nickel, rare earths or energy) have limited incentive to honour frameworks that are no longer being funded or enforced by the powers that designed them. Indonesia generates more than half its electricity from coal and controls the majority of the world’s nickel supply. It is not going to give either away on terms it did not set.

## Further Context

**Q: Why did Indonesia ban nickel ore exports?**
Indonesia banned raw nickel ore exports in 2020 to force investment in domestic processing rather than shipping unrefined material abroad. The policy built on a similar 2014 ban that successfully attracted Chinese investment in nickel pig iron and ferronickel smelters for stainless steel production. The 2020 version targets a higher-value goal: positioning Indonesia as a hub for battery-grade nickel used in electric vehicles. Indonesia holds roughly 22 per cent of the world’s nickel reserves. The strategy has worked to the extent that its share of global nickel supply has nearly doubled since 2020, though critics argue the environmental costs of rapid smelter expansion have been severe.

**Q: What is the Just Energy Transition Partnership?**
The JETP is a financing agreement launched at the 2022 G20 summit in Bali, committing $20 billion in public and private funding to help Indonesia transition away from coal. The partnership was originally co-led by the United States and Japan, with contributions from the EU, Canada, Germany, France and others. Its targets include capping power sector emissions at 290 MtCO2 by 2030 and reaching 34 per cent renewable electricity by the same year. Progress has been slow: of $21.8 billion pledged, only $3.4 billion has been made accessible, and much of the funding has been offered as market-rate loans rather than grants.

**Q: How does Indonesia’s nickel policy affect EV supply chains?**
Indonesia’s dominance in nickel means its production decisions directly affect the cost and availability of battery materials globally. The country processes laterite ore into battery-grade nickel using high-pressure acid leaching, a method essential for EV battery cathodes. The 2026 quota cut reduces available ore by roughly 120 million tonnes, creating tighter supply for both domestic smelters and international buyers. The global nickel market was already in surplus (estimated at 261 million tonnes for 2026), so the cut functions as a price-support mechanism. For EV manufacturers, it adds another variable to an already fragmented supply chain increasingly shaped by national industrial policy rather than open market pricing.