Policy Winter: Chinese Mining Enterprises in Indonesia's Nickel Sector

Indonesia controls more than 60% of global mined nickel, and Chinese capital built most of the processing capacity that made that dominance possible — by one widely-cited C4ADS estimate reported by Reuters, Chinese firms control roughly 75% of Indonesian nickel capacity. Through 2025 and into 2026 the Indonesian state moved decisively to convert that physical dominance into fiscal and commercial control. The result, for the Chinese-backed operators at the centre of the build-out, has been a "policy winter": several simultaneous, mutually-reinforcing pressures that a single strong quarter of demand could not offset.

Four regulatory levers were pulled in close succession. First, the 2026 RKAB work-plan quota for national nickel-ore output was cut to roughly 260–270 million tonnes, down from about 375 million in 2025 — and the approval cycle was shortened from three years back to one, restoring annual state control over the pace of extraction. Second, a revised HPM benchmark-price formula (Ministerial Decree No. 144.K/MB.01/MEM.B/2026, effective 15 April 2026) lifted the correction factor for 1.6% ore from 17% to 30% and, for the first time, priced in cobalt, iron and chromium by-products. Third, a royalty overhaul (Government Regulations 18 and 19 of 2025) raised tiered rates and pulled previously-exempt products — MHP, nickel sulphate and Class-1 nickel — into a 1.5–2.0% levy. Fourth, and most structurally, PT Danantara Sumberdaya Indonesia (DSI) was designated the sole state export channel for strategic commodities, phasing out private export rights from June 2026.

These policy shocks landed on top of a corporate failure that began in China. The bankruptcy restructuring of Jiangsu Delong Nickel — once ranked among the world's largest stainless-steel suppliers — severed the liquidity lifeline to its Indonesian flagship, PT Gunbuster Nickel Industry (GNI), which entered court-supervised debt restructuring (PKPU) in June 2026. In parallel, the Eramet-operated Weda Bay mine — a joint venture in which Tsingshan is the anchor downstream processor — had its 2026 ore quota slashed by more than 70% and entered care-and-maintenance, threatening up to 65% of an ~18,000-strong workforce. The verified record that follows separates what actually happened, and by how much, from the figures that have circulated with less precision.

Quota. The RKAB system is the annual licence that governs how much ore each concession may legally mine. For 2026, Jakarta cut the national target to roughly 260–270 Mt and restored annual approvals, having run three-year approvals since 2023. Industry demand was estimated near 340–350 Mt, implying a structural feedstock gap that even higher Philippine imports could not fully bridge. The intent was explicit: lift depressed prices by tightening supply — a goal it achieved on the exchange even as it starved domestic smelters of ore.

Benchmark. The HPM reform was the most substantive change to ore pricing since the mechanism was introduced. Raising the 1.6% correction factor from 17% to 30%, and adding cobalt, iron and chromium credits, lifted the regulated floor across the grade curve — a boon for upstream miners and a direct cost increase for the smelters that buy their ore. Analysts at Brights.id framed the sector on that basis with a preference for ore-levered names (ANTM > INCO > NCKL > MBMA), which the equity dashboard broadly bears out.

Royalty. Signed by President Prabowo on 11 April 2025 and effective 26 April, PP 18 and 19 of 2025 raised tiered royalties on higher-grade ore and — critically — ended the exemption for downstream products, applying a 1.5–2.0% rate to MHP, nickel sulphate and Class-1 nickel. Smelters without mining licences remain exempt, sharpening the incentive to integrate upstream.

The strategic logic of DSI differs from the 2020 ore-export ban. The ban was industrial policy — forcing value-add onshore, and it worked, taking nickel exports from around US$3 billion in 2018–19 to roughly US$33 billion by 2023–24. DSI is fiscal policy: capturing the trader margin between domestic purchase and international benchmark, and tightening foreign-exchange retention. For the Chinese smelters and trading desks that had run exactly that buy-domestic/sell-benchmark model, it removes a direct commercial channel. Notably, the China Chamber of Commerce in Indonesia had already sent a five-page protest letter over "excessively stringent regulation" and over-enforcement before the announcement — a rare public signal of investor unease.

Jiangsu Delong. Founded to make nickel alloys and once hailed as the world's second-largest stainless-steel supplier, Delong filed for bankruptcy restructuring in July 2024 after over-expansion collided with a nickel-price downturn. By December 2024 its 28 affiliated companies had declared debts of RMB 71.76 billion against only about RMB 10.49 billion of recoverable assets. In March 2026 the Xiangshui Court in Jiangsu approved the restructuring of Delong and its affiliates, naming state-linked Zhejiang Materials Development (Zheshang Zhongtuo, SZ:000906) as strategic investor; under the plan it is to acquire 75% of Delong's 99.84% indirect stake in GNI. The market read that as absorbing a distressed asset — the SOE's shares are the weakest performer on the dashboard, down roughly 17% over the year.

PT Gunbuster (GNI). Established in 2019 and inaugurated by then-President Joko Widodo in 2021, GNI is a National Strategic Project representing about US$2.7 billion of investment and roughly 1.9 million t/yr of NPI capacity at Bunta Village, North Morowali. On 19 June 2026 the Central Jakarta Commercial Court granted GNI temporary PKPU protection for up to 45 days (Case No. 140/Pdt.Sus-PKPU/2026), on a petition by shipping firms PT Pancaran Karya Shipping and PT Pancaran Maritim Transportindo. PKPU is a court-supervised breathing space, not a bankruptcy declaration: the company keeps operating while creditors negotiate. The industry association APNI reported GNI had idled five of its twenty production lines; GNI publicly denied a shutdown, calling the reports misinformation and describing line adjustments as routine maintenance. A separate suit from Dongfang Boiler (filed 4 June 2026) claims ownership of two 300 MW boiler units and around Rp 460 billion in principal and interest.

Weda Bay (Eramet–Tsingshan). Weda Bay is not a purely Chinese venture — it is operated by France's Eramet, with Tsingshan as the anchor processor at the IWIP park and Indonesian state miner Antam in the ownership chain. Its exposure to the quota regime is nonetheless acute: the 2026 RKAB allocation was cut to 12 million wet tonnes from 42 million in 2025 — a reduction of more than 70%. After a strong first quarter accelerated sales, the initial quota was exhausted by mid-May and the mine entered care-and-maintenance. Eramet Indonesia's chief executive told reporters at June's Indonesia Critical Mineral Conference that the phase could cut up to 65% of a workforce that stood near 18,000 at end-2025 — a direct human cost of the supply squeeze, pending any quota revision the ministry typically decides by end-July.

Tsingshan. Even the sector leader — owner of the ITSS and IMIP complexes and roughly a third of global stainless output — is exposed through the same input-cost channel: lower Weda Bay ore supply raises Tsingshan's own feedstock costs at IWIP, while depressed NPI spreads had already prompted line curtailments across Morowali and Weda Bay through 2025–2026.

The policy winter did not create the sector's labour and safety problems — it intensified scrutiny of a record already under international examination. The defining incident remains the ITSS furnace explosion of 24 December 2023 inside the Indonesia Morowali Industrial Park, a plant controlled by Tsingshan Holding Group. Local police and human-rights monitors recorded 21 deaths — 13 Indonesian and 8 Chinese nationals — with dozens injured; two Chinese supervisors were named as suspects in February 2024, and roughly a hundred workers blockaded the park on 27 December 2023 demanding a full safety overhaul. It was the deadliest accident in the park's history and crystallised a pattern that unions and journalists had documented for years.

That record has hardened into formal trade consequences. In September 2024 the US Department of Labor added Indonesian nickel to its forced-labour list, citing conditions in Chinese-Indonesian industrial parks; investigative groups including Global Witness have flagged the environmental toll on Sulawesi and Halmahera's coastal ecosystems, and the sector's reliance on captive coal power makes Indonesian nickel among the most carbon-intensive in the world. With Chinese conglomerates controlling an estimated three-quarters of capacity and 94% of first-half-2025 nickel exports flowing to China, the concentration itself has become an ESG and supply-chain-traceability liability for downstream automakers seeking verifiable, lower-carbon units.

The 2026 layoffs add a fresh dimension. Weda Bay's care-and-maintenance phase, and the smelter curtailments rippling through IWIP and IMIP, convert a pricing dispute into a livelihoods question for tens of thousands of workers and contractors — precisely the pressure that has historically triggered union mobilisation and, in turn, further regulatory attention.

LME nickel rallied about 37% from its late-December 2025 low into April 2026, touching roughly US$19,160/t on 26 January 2026, as the market priced the RKAB cut, the HPM reset and an emerging ore shortage. The International Nickel Study Group flipped its 2026 balance to a ~32,000-tonne deficit from a 283,000-tonne surplus in 2025. A parallel sulphuric-acid squeeze — linked to Strait-of-Hormuz disruption and a Chinese acid-export ban — raised the cost floor for HPAL processing specifically. The upshot: upstream, ore-levered producers (Vale Indonesia, Harita/NCKL, Nickel Industries) gained on the dashboard, while the names most exposed to distressed-asset absorption or quota loss (Zheshang Development, Eramet) lagged or fell sharply from their peaks.

The through-line of 2025–2026 is that the era of low-barrier, lightly-regulated expansion has ended, and that ownership structure now determines survival. Three implications follow for operators and counterparties.

1 · Upstream integration and local co-ownership are now defensive necessities, not options. The royalty exemption for licence-holders, the HPM by-product credits that reward the ore-owner, and the political durability that a state partner such as Antam confers all point the same way: 100%-solo foreign equity in an ore mine is now the most exposed structure in the chain.

2 · The Danantara channel changes the trading model, not just the paperwork. With DSI empowered to set the export price and take a margin from 1 September 2026, the buy-domestic/sell-benchmark spread that funded many private desks compresses. Contract review of below-benchmark long-term offtakes is explicit in the regulation — a direct risk to legacy supply agreements that should be stress-tested before the Phase-2 gate.

3 · Counterparty diligence must now price parent-company fragility. The GNI case is the template: a subsidiary's standalone metrics told you little once the Jiangsu parent lost its capacity to provide liquidity. For any Chinese-backed Indonesian counterparty, the relevant credit question is no longer only "can this plant run?" but "can its parent still stand behind it under its own restructuring, capital-control and creditor constraints?"

For a trading and advisory desk, the actionable posture is caution on paper exposure to distressed-parent structures, attention to the DSI price-setting mechanism as it activates, and recognition that the metal and the operators have decoupled: one can be bid while the other is in court. The verified record is the antidote to the noise — and the noise, in this story, has been considerable.