Nickel recycling could become Indonesia’s next downstream race

By Dominikus

Indonesia’s nickel downstreaming strategy may need to move into its next phase as battery recycling becomes a new business frontier, with nickel-rich batteries offering stronger recovery economics than lithium iron phosphate batteries, Jared Zhu, Consulting Director at Shanghai Metals Market, said during the Indonesia Critical Minerals Conference in Jakarta last week.

Zhu said the economics of recycling differ sharply by battery chemistry. For nickel cobalt manganese batteries, recycling is value-driven because nickel, cobalt, manganese, and lithium all carry recoverable metal value. For LFP batteries, recycling is more policy-driven or environmentally driven, mainly supported by extended producer responsibility rules and waste management requirements rather than high material recovery value.

The distinction is important for Indonesia because the country has focused heavily on the front end of the battery supply chain, from nickel mining to smelting, HPAL, and mixed hydroxide precipitate production. The next opportunity may sit at the back end of the supply chain, where battery scrap and black mass can become secondary sources of nickel, cobalt, manganese, and lithium.

In practical terms, recycling could help Indonesia build a more circular battery materials ecosystem. Instead of relying only on mined limonite ore for HPAL and MHP production, companies could eventually recover nickel units from used batteries, manufacturing scrap, and black mass, then feed those materials back into nickel sulfate, precursor cathode active material, and cathode active material production.

This would be different from Indonesia’s existing stainless steel-linked nickel route. Saprolite ore is generally processed through pyrometallurgical facilities into nickel pig iron or ferronickel for stainless steel. Battery recycling is tied more closely to the chemical battery route, where recovered metals can support the production of battery-grade materials.

Zhu’s presentation showed that NCM could outperform LFP from a whole-life-cycle perspective because the value of recovered metals can improve the economics of recycling. This makes nickel-rich batteries not only a performance play, but also a circular-economy play for companies that can connect battery production, material recovery, refining, and reuse.

Read also : BKPM seeks to replicate nickel downstreaming in bauxite, solar panels

For decision makers, the business impact is significant. Recycling could reduce long-term raw material exposure, support supply security, lower dependence on primary mining, and help battery material producers meet buyer requirements for sustainability and responsible sourcing. It could also create a new investment layer after smelters and HPAL plants, covering collection networks, black mass processing, hydrometallurgical refining, and battery material reintegration.

The opportunity is also linked to market access. As electric vehicle and battery buyers demand stronger sustainability credentials, recycled content and traceable secondary materials could become a commercial advantage. Companies able to show closed-loop supply chains may have a stronger position in negotiations with automakers, cell makers, and cathode producers.

Indonesia is not yet known primarily as a recycling hub, but its growing role in nickel mining and battery intermediate production gives it a strategic starting point. If MHP, nickel sulfate, precursor, and cathode projects expand domestically, recycling facilities could eventually be built near the same industrial clusters to capture scrap from battery material and cell manufacturing.

However, the business model will depend on timing and scale. Battery recycling needs sufficient feedstock, clear regulation, technology partners, environmental safeguards, and reliable buyers for recovered materials. Without domestic cell manufacturing or battery scrap availability at scale, early recycling projects may need to rely on production scrap, imported black mass, or partnerships with regional battery producers.

For Indonesia, the broader message is that downstreaming should not stop at producing MHP or nickel sulfate. The next stage of value creation may come from controlling the full material loop, from ore to battery materials and eventually back to recovered metals. In a market where buyers increasingly value sustainability, supply security, and life-cycle accountability, recycling could become Indonesia’s second downstream race.

Editing by Reiner Simanjuntak