This question is often escalated since Indonesia has been recognized to share over 50% of global primary nickel production in 2023. If yes, how it happens. In over last decade (2010 – 2017), Indonesia just contributed less than 20% of global primary nickel production. However, since several smelters were commenced in 2018, Indonesia has reached over 20% of global market for primary nickel. In 2023, Indonesia nickel production share has reached over 50% of global market. Generally speaking, most economists agree that Indonesia is superior to control the nickel price in the global market.
INDONESIAN POSITION
Indonesia has been declared as the world’s largest nickel producer and reserves. In 2023, Indonesia shared 56% of global production and 42% of global reserves. Therefore, Indonesia has played a critical role in corresponding the global market for nickel.
The total reserves and the annual production can be used to estimate the life of mine for Nickel production in Indonesia. Therefore, with the current production rate of Indonesia, the life of mine remains 27 years.
What kind of global economic issues can be connected to the global nickel market based on Indonesian perspective? First, the primary nickel productions are mostly contributed by laterite deposits that are distributed within the 22 to -22 degrees latitude. These have deposits are geographically concentrated on the specific regions. Second, the geographically concentrated of nickel deposits could affect the distribution to the destination countries. Third, since it is concentrated in the certain regions, the geopolitical issues are sensitive in maintaining the nickel distribution globally. Fourth, the nickel can secure the global energy transition program that could affect the future global nickel demand. Finally, the nickel prices experience to demonstrate the volatile price since last two decades.
The geographically concentrated nickel deposits based on Indonesia production level was examined using the Herfindahl-Hirschman Index (HHI) that it has widely been well-known to investigate the monopoly issue for commodity trading. Based on the annual Indonesian nickel production from 2010 to 2023, Indonesia nickel production was unconcentrated from 2010 to 2020. Then, it seemed to moderately concentrated since the HHI ranged from 0.10 to 0.25 from 2020 – 2022. In 2023, Indonesia has declared as the most global significant nickel concentration since the HHI was over 0.25.
The another most popular tool in investigating the level of concentration is the global supply concentration (GSC) model. This result supports the HHI that the Indonesian nickel production has significantly concentrated in 2022 and 2023 since the GSC value reached over 90. Therefore, two methods have agreed that Indonesian nickel production has significantly contributed to the global market.
However, the supply sustainability should be taken into account that it can be examined by computing the nickel price volatility. Since the ratio between the maximum and the minimum nickel prices was above 10, it can be concluded that the supply side was unstable. In this case, the monthly nickel price data were compiled from January 2000 to December 2024 that contained 300 observations. The volatility was 10.81 that it demonstrated the unstable supply over two decades.
Then, the next question is, were the previous arguments supported by the quantitative analysis based on Indonesia perspectives?
The global nickel supply was examined using the stochastics multicriteria acceptability analysis (SMAA) – TRI models. There is evidence that the global GDP is the most significant variable to influence the nickel price. Then, it was followed by the China GDP. Surprisingly, the Indonesian production has affected the nickel prices as shown in Figure 4 below (D1 represents Indonesian shares of global nickel production).
Another relevant variable to determine the future nickel market can be examined based on the demand side. Using the quantitative analysis, the future demand was determined by the correlation between the China GDP per capita and the population. Since they appeared to demonstrate the significant positive correlation, the regression linear method can be taken into account.
The correlation between the China GDP per capita and the population are shown in Figure 5 below. The blue line expresses the Zheng et al opinion in 2018 that the data were taken from annual nickel demand from 1990 to 2014. While the orange line demonstrated correlation using the monthly data from January 2010 to December 2023. The International Nickel Study Group confirmed to close to the orange line. Then, the China nickel demand was computed from the global nickel use per capita multiplies with the China population.
The evidence above suggests that Indonesia has played a critical role to control the global nickel market. Indonesia has demonstrated as the most concentrated nickel producer that can contribute to the unstable supply condition. The Indonesian nickel export was sold to China over 75%. The main export nickel from Indonesia to China was intermediate products. While, China has been recognized as the world’s largest producer for first-use and end-use products.
