ESG divide puts coal-powered nickel at market crossroads

By Adianto P. Simamora

Coal-fired nickel smelters are facing a strategic test as producers weigh continued reliance on China’s stainless-steel demand against the tighter ESG and certification standards required by Western battery supply chains.

Speaking at the IFTAR CoalMetalAsia forum, Meidy Katrin Lengkey, Secretary General of the Indonesian Nickel Miners Association (APNI), said market orientation would ultimately determine product specifications — and how urgently producers must upgrade environmental and governance standards.

“Most of Indonesia’s nickel products — although we account for around 65% of global supply — are almost entirely shipped to China,” she said. “China focuses on the nickel and iron proportion; they are not too concerned about other impurities.”

That demand profile has underpinned output growth over the past decade, supporting smelters whose economics remain closely tied to coal-fired power. Chinese stainless-steel mills prioritise metallurgical consistency and supply availability, limiting pressure for broader environmental disclosures across the value chain.

India is emerging as another outlet with similar characteristics. “The main concern there is availability,” Meidy said, noting that Indian demand is also largely linked to stainless steel production.

The equation shifts in Europe and the United States, where nickel demand is increasingly tied to electric vehicle batteries and energy storage systems.

“These markets are environmentally conscious and are concerned about environmental reputation and ESG compliance,” she said.

Read also:Global nickel oversupply seen shrinking 66% after Indonesia cuts quotas

Meidy acknowledged that some domestic producers may already meet certain benchmarks, but inconsistencies remain.

“Some producers may already comply, but there are still gaps,” she said, calling for a reassessment of ESG standards and certification readiness to secure access to higher-value markets.

Certification could become a decisive filter, she added. If stricter standards narrow the pool of eligible supply, tighter availability could support higher prices. If more producers comply, larger volumes could qualify for premium segments.

“Both scenarios can become opportunities,” she said.

The strategic tension is compounded by the sector’s energy base, as much of Indonesia’s nickel processing capacity is still powered by coal even as nickel is promoted globally as a critical mineral for decarbonisation.

That linkage is influencing thinking within the coal industry itself.

“Like it or not, coal companies — especially those under large holding groups — need to diversify,” said Yudhi Putro, Director at PT Kaldera Energi Nusantara. “We realise that the coal business will not last forever.”

He said diversification is typically carried out at the holding-company level, using margins from coal subsidiaries to finance new business units, including renewable power generation, electric vehicles and other minerals such as bauxite. Some conglomerates have also expanded into food and fisheries.

On ESG and net-zero commitments, Yudhi described the pressure as largely demand-driven.

“The push for ESG and net zero comes from the market — especially from Europe and the United States,” he said.

Policy alignment, he added, cannot rest with a single institution.

“We cannot rely on a single ministry; this requires cross-sector discussion,” he said.

He also argued that downstream buyers share responsibility in building cleaner supply chains.

“If the market demands a clean supply chain, they also need to help support the ecosystem,” he said.

Editing by Reiner Simanjuntak