For years, China raced to secure the critical minerals needed to fuel its economy and the global clean energy transition. Nickel was supposed to be one of the surest bets. Now, one of China’s largest investments in Indonesia’s nickel industry is unraveling—and with it, some of the assumptions behind Beijing’s global resource strategy.
Indonesia has become the world’s dominant source of refined nickel, producing more than half of the global supply. That makes it indispensable to industries ranging from stainless steel to electric vehicles. Chinese firms, eager to cement control over this crucial resource, poured billions of dollars into Indonesian smelters to process the metal close to its source.
One of the most ambitious of these projects is now in crisis.
A Giant Falters: The Rise and Stall of GNI
The facility at the center of the storm is PT Gunbuster Nickel Industry, or GNI, a sprawling smelting complex on Sulawesi island backed by China’s Jiangsu Delong Nickel Industry. GNI was designed to be one of Indonesia’s largest nickel operations, with a planned annual capacity of 1.8 to 1.9 million metric tons of nickel pig iron—a lower-grade form of nickel primarily used in stainless steel.
The scale is significant. Indonesia produced around 1.6 million metric tons of nickel metal in 2022, meaning GNI alone was expected to represent about 10 to 12 percent of the country’s total refined output. Because Indonesia supplies more than half of the world’s nickel, GNI’s potential shutdown could disrupt around 5 to 6 percent of global supply—a meaningful share for industries that rely on nickel, from carmakers to appliance manufacturers.
Today, GNI’s future looks grim. Many of its production lines have gone silent. Suppliers remain unpaid. Creditors are scheduled to meet in August as the company scrambles to find emergency financing. Jiangsu Delong has already exited three of its four major Indonesian nickel projects, reportedly absorbing losses of up to $300 million a year. GNI may not survive the summer.
The Wrong Bet: When Markets Defy Strategy
This isn’t a story of geopolitical confrontation. It’s a lesson in industrial ambition outrunning market fundamentals.
It began with what seemed like a smart play.
But commodity markets rarely follow tidy scripts. A flood of new production—including from Indonesia itself—quickly drove prices down by more than 40 percent, turning profitable projections into steep losses. GNI’s challenges were compounded by unfinished infrastructure, high electricity costs, and penalties for missed delivery deadlines.
In 2020, Indonesia banned exports of raw nickel ore to encourage investors to build refining facilities domestically. Chinese companies embraced the opportunity. Nickel prices rose sharply in anticipation of soaring demand from electric vehicle manufacturers.
It was a project built for a long boom that met a sudden bust.
The demand picture has also shifted. While nickel remains essential for stainless steel and premium electric vehicles, many carmakers are turning to lithium iron phosphate (LFP) batteries, which don’t require nickel at all. The market outlook is murkier than investors once believed.
Ripple Effects for China and the Global Supply Chain
The risks extend beyond one facility. Chinese firms are involved in roughly three-quarters of Indonesia’s nickel industry, either through ownership or partnerships. When large-scale projects stumble, the consequences ripple outward, unsettling balance sheets and potentially tightening supplies for manufacturers worldwide.
To be clear, Chinese companies aren’t strangers to difficult markets. They have often succeeded where others dared to venture, building commanding positions in the refining of cobalt, rare earths, and graphite. What’s happening with GNI is not evidence of strategic naïveté but a reminder that even the boldest industrial plans can falter when commodity cycles turn against them.
A Warning Shot for Global Resource Strategies
Indonesia now faces its own questions. The government has long welcomed Chinese investment as a way to build up its manufacturing base, but policymakers have also begun seeking a broader range of partners, including Japan, Europe, and the United States, in hopes of creating a more balanced industrial future.
Other economies, too, are moving to diversify supply chains. New nickel mining and refining projects are gaining traction in Australia, Canada, and India. The story of GNI isn’t just about Indonesia or China—it’s a warning to every country and company pursuing big bets on raw materials. The challenge isn’t just building factories and mines. It’s ensuring that those investments can withstand the brutal ups and downs of global commodity markets.
GNI is unlikely to be the last major nickel project to struggle. As the world accelerates its transition to clean energy, success will depend not only on securing the right resources but also on navigating the inevitable surprises along the way.
This article is co-authored by Yeta Purnama, a researcher at the Center of Economic and Law Studies (CELIOS), and Muhammad Zulfikar Rakhmat, Director of the China-Indonesia Desk at CELIOS.
