SULAWESI — The United States struck a trade deal with Indonesia to secure access to Indonesian nickel as part of efforts to reduce reliance on China. Indonesia produces more than half the world's nickel supply, and its nickel industry relies heavily on foreign investment, mainly from Chinese companies that control a majority of the country's refining capacity.

The majority of Indonesia's nickel is currently used for stainless steel production, with the remainder going to battery supply for electric vehicles and data centers. Refined nickel metal can be used to create stainless steel, alloys, or rechargeable batteries for electric vehicles and other technology. Indonesia's government aims to make the country a major participant in the green-energy transition, and construction of the Indonesia Pomalaa Industrial Park in Southeast Sulawesi is being promoted as a new electric vehicle battery production hub.

Most of Indonesia's nickel mining is concentrated on the island of Sulawesi. The number of active nickel-mining licenses in Sulawesi increased from one in 2005 to 408 in 2022, then decreased slightly in 2023 as the government regulated the sector and managed oversupply.

Indonesia's nickel deposits are mostly lateritic ore found near the surface in tropical regions, extracted using open-pit mining that requires clearing trees and the top layer of soil. Mining loose lateritic soil causes sediment, which washes into rivers, oceans, and other water sources when it rains. Heavy metals in lateritic soil can pollute drinking water and disturb ocean ecosystems.

Most of Indonesia's lateritic nickel ore has low nickel content and must be processed and smelted with high heat or chemicals before refining into usable metal. Indonesian smelters mainly use electricity generated by coal. The country uses two types of smelters that produce potential pollutants—either tailings or slag—that can leach into the ground or water if not stored properly. Smelters and coal-fired power plants can emit air pollutants such as toxic fine particulates if not equipped with control measures.

Boenaga, a Bajau village on the Sulawesi mainland, is surrounded by nickel mines, deforested hills, and exposed red dirt. Nearby mining companies cover villagers' utility bills, provide monthly payments from nickel shipments, and offer other benefits to residents. Agussalim, the 50-year-old village secretary of Boenaga and spokesperson for a nearby mining company, said most villagers work in mining. Local fishermen said that before mining, they fished in front of the village, but now they fish farther away and spend more on fuel. One fisherman said: "If I can't buy gas, I can't go fishing. Sometimes I can't even afford to buy cigarettes."

Conservationist Habib Nadjar Buduha, who founded Toli Toli Giant Clam Conservation in 2009, has documented that mining is making water murkier and stressing critically endangered giant clam species between Boenaga and Labengki Island. Over the past decade, giant clam populations have declined in those waters, Buduha said. Even five miles away from the nearest nickel mine, the water has become cloudy and sediment has settled over coral reefs. Giant clams are filter feeders whose gills can be covered by sediment, which could suffocate them, and heavy metals in sediment can pose a risk of toxic metal buildup.