TEMPO.CO, Jakarta — The Center of Reform on Economics (CORE) Indonesia has released a new report titled Tug of War over Critical Minerals, examining intensifying global competition for strategic mineral resources and its implications for resource-rich countries, including Indonesia.
The report highlights fierce competition among major powers for access to critical minerals, with Latin America, particularly Venezuela, emerging as a key arena of geopolitical rivalry. CORE researcher Mohammad Faisal pointed to Venezuela as a cautionary example for Indonesia.
According to Faisal, recent developments involving Venezuela’s leadership underscore the United States’ strategic interest in securing global energy and critical mineral supplies.
“Venezuela shows how strategic resources can become instruments in geopolitical struggles among major powers,” he said, adding that US actions there cannot be separated from its rivalry with China.
“Both countries continue to compete for global critical minerals, including rare earth elements that underpin high-tech industries,” Faisal said in the report, quoted on Tuesday, January 20, 2026.
China’s Dominance in the Supply Chain
Faisal noted that China currently dominates the global critical minerals supply chain. Based on data from the United States Geological Survey (USGS) Critical Mineral Atlas, China controls around 42 types of critical minerals, spanning both mining production and refining capacity.
This dominance is evident in several strategic commodities. China nearly monopolizes global gallium production and controls a large share of magnesium refining. USGS data for 2025 show that China accounts for about 69 percent of global rare earth production and controls around 90 percent of the rare earth magnet market.
These minerals are essential for industries such as electric vehicles, aerospace, electronics, and artificial intelligence, making supply chain control a key strategic priority for major economies.
Indonesia’s Strategic Position and Risks
For Indonesia, which holds reserves of critical minerals including nickel, cobalt, tin, zirconium, and copper, these global dynamics present both opportunities and risks.
CORE’s report notes that Indonesia dominates global tin production, accounting for around 22 percent, and nickel production, with about 54 percent of global output.
Despite holding fewer types of critical minerals than neighboring countries such as Vietnam and Malaysia, Indonesia’s position as the world’s largest nickel producer places it at the center of US-China competition. “This position makes Indonesia an important player in the contest for critical mineral dominance,” Faisal said.
However, he warned that without strong governance and consistent downstream processing policies, Indonesia risks being drawn into geopolitical rivalries rather than maximizing the value of its mineral wealth.
US Access, Trade Talks, and Policy Concerns
Faisal said Indonesia’s strategic position has prompted growing US interest in accessing its critical minerals. By December 22, 2025, Indonesia and the United States had agreed on an Agreements on Reciprocal Trade (ART) framework.
The Coordinating Ministry for Economic Affairs said both countries would meet in mid-January 2026 to prepare a draft agreement, with the aim of signing it before the end of the month.
Under the framework, the US would gain access to Indonesia’s domestic market and critical minerals, while several Indonesian agricultural commodities, including palm oil, coffee, cocoa, and tea, would receive tariff exemptions.
CORE warned that granting extensive access to critical minerals without a clear industrial strategy could undermine Indonesia’s downstreaming agenda, as mandated by Law No. 3/2020 on Mineral and Coal Mining.
US access to Indonesian minerals is expected to follow a business-to-business scheme facilitated by Danantara, which will channel US investments into the sector.
According to Coordinating Minister for Economic Affairs Airlangga Hartarto, US companies have expressed interest in Indonesia’s automotive, aviation, and defense industries. Faisal cautioned that problems could arise if the agreement merely opens the door to raw material exports, reinforcing unequal North–South trade patterns.
Lessons from Nickel and Policy Recommendations
CORE drew lessons from Indonesia’s nickel downstreaming experience. While downstreaming has significantly boosted export value—processed nickel exports rose from US$764 million in 2018 to US$7.1 billion in 2024 with the operation of 61 smelters—it has also created new dependencies, limited technology transfer, and uneven benefit distribution.
Faisal noted that nickel prices fell sharply from a peak of US$33,924 per metric ton in March 2022 to US$14,883 per metric ton in December 2025, a 56 percent decline.
Despite controlling nearly half of global production, Indonesia has limited influence over prices due to oversupply and uncoordinated capacity expansion.
To address these challenges, CORE issued five recommendations: expanding trade negotiations to include zero tariffs for Indonesia’s manufactured exports; formalizing agreements through binding bilateral frameworks; establishing a single authority to ensure investment certainty; requiring mineral access to be tied to domestic value-added manufacturing; and implementing selective export tariffs to discourage raw material exports.
“Access to critical minerals must be accompanied by clear industrial policies,” Faisal said. “Without them, Indonesia risks losing momentum to build value-added manufacturing and strengthen its position as a regional industrial hub.”
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