Jakarta. Indonesia’s nickel policies have worried Chinese investors, as businessmen penned a letter to President Prabowo Subianto to improve the investment climate.

In that five-page letter, the China Chamber of Commerce in Indonesia has waved a flag of concern for Jakarta’s drastic trims to nickel ore output.

“Since this year, nickel ore mining quotas have been cut sharply, with reductions for large mines exceeding 70%, totaling a drop of 30 million tons, disrupting the development of downstream industries such as new energy and stainless steel,” the group wrote.

Indonesia has intended to slash its nickel ore output to keep prices stable. At the beginning of the year, the government floated a plan to cap the annual nickel ore production at just 250-260 million tons, way down from the 379 million tons set for 2025. As of early April, the government had greenlit the production for 210 million tons, local news agencies revealed.

The Chinese investors zeroed in on the latest hike to the benchmark price of nickel ore and revisions of its pricing rules. This price sets the minimum price for domestic sales of nickel ore. However, such changes have triggered a 200% surge in comprehensive ore costs, according to the document.

“As the largest investors and operators in Indonesia’s nickel industry, Chinese-invested enterprises now face sharply rising production costs, widening operational losses, and imbalances across the industrial chain,” the letter reads.

The businesspeople cautioned that the move could deal a blow to both existing and future investments, while also putting the jobs of over 400,000 people in jeopardy. The policies also risk “seriously undermining global investors’ confidence in Indonesia’s nickel sector”, they wrote.

The Jakarta Globe has reached out to the Energy Ministry for comments on the Chinese investors’ concerns.

Between January and March, foreign direct investments (FDI) from mainland China and Hong Kong totaled around $4.9 billion. Their combined investments in Indonesia’s overall industrial processing totaled Rp 40.5 trillion ($2.3 billion) over the same period.

Nickel is a mainstay ingredient in electric vehicle battery production, and Indonesia -- which is abundant in the silvery-white metal -- wants to pivot from raw commodity export to producing more sophisticated goods. To this end, Indonesia has opened its doors to foreign investors. 

According to the US Geological Survey, Indonesia is home to the world’s largest nickel reserves, with estimates placing them at 62 million metric tons.