According to a Bloomberg Intelligence report, this situation could lead to a wave of bankruptcies in the sector.

Julian Ambassadur Shiddiq, Director of Mineral and Coal Program Development at Indonesia's Ministry of Energy and Mineral Resources, said that the crisis could significantly impact Indonesia's nickel industry.

"If China's steel industry weakens or collapses, demand for Indonesian nickel could decrease, resulting in oversupply," Julian said in an interview with Katadata.co.id on Friday, September 27, 2024.

This scenario would likely lead to a drop in global nickel prices, negatively affecting Indonesia’s domestic downstream projects. "Our trade balance could also be impacted," Julian added.

Currently, 84.75 percent of Indonesia's processed nickel products are exported to China, where nickel is a key raw material for producing stainless steel.

China is one of the largest producers of stainless steel, with much of its nickel supply sourced from Indonesia.

Nickel’s corrosion resistance makes it essential for various stainless steel products used in construction, automotive, household appliances, and manufacturing.

To reduce dependence on the Chinese steel market, the Indonesian government is exploring strategies to diversify its nickel downstream products beyond stainless steel manufacturing.

"The electric vehicle (EV) battery sector is a potential game-changer that could shift market demand," Julian said.

The government is preparing mitigation strategies through the development of new downstream markets, aiming to reduce Indonesia's reliance on China's steel industry.

Julian emphasized that the focus will be on supporting industries like EV battery cell production, including components such as anodes, electrolytes, and separators.