Cheap coal, cheap workers, Chinese money: Indonesia’s nickel success comes at a price

Standing chest-deep in the Molucca Sea, just outside the billowing smokestacks of the world’s largest nickel industry, Upin adjusts his mask and dives. Members of his people, the Bajau, have been known to stay underwater for more than 10 minutes but Upin resurfaces shortly. He hauls a rugged disc of metal over the side of his dugout canoe.

“Since the factories arrived, there has barely been any fish to catch,” he says and grimaces towards the opaque water.

“The ocean has become warmer and more polluted. It itches on my skin but I have no choice. Collecting scrap metal is the only way for me to survive.”

Nickel has upended life on the Indonesian islands of Sulawesi, Halmahera and Obi. Over a decade the region has gone from modest ore exporter to the world’s foremost refiner of the metal. A rural backwater has been catapulted into modernity.

Above: Upin steers his boat with wife Jenni and son Riski past nickel factories in Morowali. Since the factories opened, their drinking water has been polluted and fish is no longer abundant. – All images by Per Elinder Liljas

Above: Open-cut nickel mining leads to erosion and sediment sludge in local waterways

Today this is the home of about 200 smelter production lines and 200,000 factory workers – and there could be more to come. As demand soars for nickel to power batteries and electric vehicles, Jakarta banks on the industry being its ticket to becoming a developed nation by 2045.

At the moment it is knocking the competition out of the water. Indonesia produces about half of all the world’s nickel and has pushed prices so low that most other producers are operating at a loss. Australian miners BHP and Glencore announced in February they may leave the metal altogether.

Indonesia’s recipe for success is cheap coal, cheap ore, cheap workers and Chinese money. But this has meant a steep price to pay for locals, the environment and labourers.

In Upin’s village, Kurisa, on the eastern shore of Sulawesi, the air is pungent with the smell of metal. A smelter flanks the settlement on one side and a coal power plant on the other.

A coal power plant next to a nickel smelter in Morowali. Cheap coal power has been a key ingredient in the Indonesian nickel boom

“Today the air is OK,” says Upin’s neighbour Fauziah.

“Other days, we’re enveloped in thick smoke. The kids are coughing and feel dizzy. Last week a baby died from breathing difficulties.”

Indonesia sits on the world’s largest reserves of nickel but the concentration in the ore is very low. Refining it to battery quality, or even just to make stainless steel, is an incredibly energy-intense process. This has been powered by a construction spree of coal power plants.

Jakarta has created a loophole in its goals to phase out coal to benefit the nickel industry. Since the metal is critical for the green transition, it is allowing new coal power plants connected to nickel smelters as long as they shut down before 2050. This has led to the country setting new records in its coal consumption and carbon dioxide emissions.

“Calling the nickel industry a part of the green transition is a joke,” says Muhammad Taufik, coordinator at Jatam, an organisation advocating for a more just mining industry in Indonesia.

“It is good that it creates jobs. But it also destroys ecosystems and people’s lives.”

‘This water started turning orange’

Juhardi sits outside his house in Kurisa, grappling with pieces of plastic pipe. He woke up after a night shift at the factory to find the water supply cut off. This is not uncommon.

“Before, we led our water down from the mountains, but then this water started turning orange.”

Water samples from a range of locations along the coast confirm high levels of heavy metals stemming from the mines and refineries.

In a river near Kurisa, popular for fishing, the concentration of nickel was more than 15 times higher than the World Health Organization’s guideline value. The concentration of hexavalent chromium, a contaminant made famous in the Oscar-winning movie Erin Brockovich, was more than five times higher than WHO’s guideline value for drinking water.

A former environmental technician at one of the nickel companies is not surprised.

“During audits, my supervisor used to tell me to hide environmental violations,” says the man, who wants to be anonymous in order not to disqualify himself for future employment.

He shows an image on his phone of pools of reddish liquid inside an industrial area, and outside its perimeter. “During the rainy season it always floods, and contaminated water flows out into the environment.”

Many inhabitants in the region have been bought out from their land. Others tell stories of being forced away. The inhabitants of Kurisa live in stilt houses over the water and don’t hold any land titles. Lacking other opportunities, those young and healthy enough have taken up jobs in the factories. Juhardi describes the work as tough, with scant security precautions.

“Yesterday two trucks collided. Instead of reporting it, my boss said that we should just fix up the trucks and drivers. The companies cover up accidents so they don’t have to pay compensation or stop work. That means they never learn, and new accidents happen every day.”

On Christmas Eve last year, catastrophe struck. An explosion at a smelter took 21 lives.

Videos from the aftermath soon became viral. They show workers jumping out of a building consumed with flames and smoke. Others lie writhing in pain on the ground. During the following days, workers shared the identity of victims in internal WhatsApp groups.

Among the names, Juhardi saw his cousin’s son, listed as seriously wounded. Juhardi reached his parents by phone, and even though five days had passed, this was the first notice they had about their son. Eventually they found him at a hospital.

“I’m extremely disappointed with the company’s slow response,” Juhardi says.

Media reported about the explosion both inside and outside the country. A union leader says the government is determined to convict those responsible but they don’t want more of a scandal.

A spokesperson for PT Indonesia Tsingshan Stainless Steel, a subsidiary of PT Indonesia Morowali Industrial Park in Morowali, told the ABC at the time of the explosion it would cooperate with the investigation.

“We sincerely apologise for this incident and we are working closely with authorities to investigate what caused the accident,” he said.

Another shift is already on the way, with western auto companies such as Volkswagen and Ford investing directly in Indonesian refineries to secure their nickel supply.

This could propel changes. Aimee Boulanger, the executive director at the Initiative for Responsible Mining Assurance, an organisation that has set a global standard for best practice in mining, says the government of Indonesia, as well as several of the mining outfits in the country, have started discussions with them.

“Previously, car brands used to be five to 12 steps separated from the mining industry. That they are now investing directly in the mines is creating heightened awareness of mining conditions,” Boulanger says.

“Indonesia is having a moment right now. Will it be known for responsible mining, or will it be a new Congo?”