Geopolitics, price gaps pose risks to Indonesia’s critical minerals drive: DBS

By Tri Subhki R

Indonesia’s efforts to strengthen its position in the global critical minerals supply chain face growing headwinds from geopolitical tensions and increasingly fragmented commodity markets, industry analysts said at the 4th DBS Metal and Mining Forum 2025 held on Wednesday.

Mike Zhang, Managing Director and Global Head of Metals and Mining at DBS Bank Ltd, said that since 2024, trade restrictions have disproportionately affected critical minerals with highly concentrated supply chains. The US has imposed new import tariffs on nickel, zinc and cobalt, while China has tightened export controls on rare earth elements.

“These developments threaten the principle of the ‘single price law’ and are widening price disparities across markets,” Zhang said. He added that the sector now also faces the “energy trilemma” of balancing affordability, reliability and sustainability, a challenge particularly relevant for Indonesia’s fast-growing nickel and mineral processing industry.

Indonesia has designated 47 commodities as critical minerals due to their strategic importance for downstream industrialization and national security. These commodities contribute roughly 10–11% of national GDP and are considered vulnerable to supply disruptions.

Read also: ICC: Indonesia emerging as strategic hub in critical minerals supply chain

Despite volatile global conditions, long-term demand for metals remains resilient. DBS estimates global mining investment needs could reach US$3.5 trillion over the next decade, with copper expected to account for around 35% of total capital expenditure. Spending on gold, coal and iron ore will follow, underscoring that the sector remains attractive even as geopolitical pressures intensify.

DBS Senior Economist Radhika Rao said domestic sentiment is improving, supported by stronger demand and increased government spending. She noted that fiscal and monetary policy space remains available to maintain economic stability, with domestic policy developments likely to become a key market catalyst.

Indonesia’s metals and mining sector continues to draw substantial foreign capital, particularly from China. Chinese investment in the country surged from US$0.6 billion in 2015 to US$8.1 billion in 2024, with cumulative inflows reaching US$34.19 billion from January 2019 to September 2024—representing about 18% of total FDI. Much of this investment has flowed into nickel smelting, stainless steel, and EV battery-related industries.

Anthonius Sehonamin, Head of Institutional Banking Group at PT Bank DBS Indonesia, said that the minerals sector is undergoing a transformation that demands greater supply chain resilience and sharper market insight, as companies navigate trade disruptions and evolving industrial policies.

The annual forum brought together upstream and downstream mining companies, smelter operators, analysts, and policymakers to discuss regulatory changes, investment trends, and the long-term outlook for Indonesia’s critical minerals strategy.

Editing by Reiner Simanjuntak