Indonesia Nickel Refining Crunch Threatens India's EV Battery and Stainless-Steel Costs

India's electric vehicle battery, energy storage and stainless-steel industries are facing rising nickel prices and supply uncertainty because of a refining bottleneck in Indonesia. Nickel refining plants there are running short of phosphorus and sulphur — chemicals essential for the processing chain — after the West Asia war and the periodic blockade of the Strait of Hormuz disrupted shipments of these inputs.

Indonesia is the world's largest nickel producer and India imports roughly 80 per cent of its ferronickel requirement from the country. Ferronickel and nickel pig iron are the primary raw materials for stainless-steel production. Nickel also accounts for about 22 per cent of the cost of an electric vehicle battery using nickel-manganese-cobalt (NMC) chemistry, putting Indian EV makers and battery cell assemblers directly in the line of fire.

Industry executives say the immediate concern is not a physical shortage but rising costs, shipment delays and supply uncertainty. Some Indian manufacturers are already absorbing higher landed prices while others are accelerating the shift from NMC chemistry to lithium iron phosphate (LFP) cells, which use no nickel. LFP cells dominate the entry and mid-segment EV market and have lower energy density but better safety and cost profile.

The Centre is encouraging domestic processing of critical minerals through the National Critical Minerals Mission and recent auctions of nickel and cobalt blocks. KABIL, the joint venture between NALCO, HCL and MECL, has also been pursuing overseas mining stakes in countries such as Argentina and Australia to diversify the nickel supply base.