The workers paying the price for Indonesia’s nickel boom – New Mandala

On 13 June 2024, a nickel smelting furnace at the Indonesia Morowali Industrial Park (IMIP) in Central Sulawesi caught fire and exploded, sending two workers to hospital. A year earlier, on 24 December 2023, a smelting furnace at the same facility also caught fire and exploded, killing 13 workers on the spot; several others late succumbed to their injuries later in hospital, resulting in the death of 21 workers. Another 39 workers suffered severe burns in the 2023 incident, with some becoming disabled and unable to work.

These tragic events expose a major flaw in the Indonesian government’s ambition to establish the country as the world’s nickel processing hub. Indeed, the Indonesian government’s policy of resource nationalism, particularly through nickel downstreaming, has successfully transformed Indonesia’s position in the global markets for this newly ‘critical’ mineral, with rising production figures, an increasing market share.

According to the International Nickel Study Group, Indonesia’s share of global nickel exports surged from 20% in 2015 to 80% in 2020. The export value of nickel-related commodities, particularly stainless steel, ferronickel, and battery materials, soared from US$6 billion in 2013 to US$30 billion in 2022. As of July 2023, Indonesia had 43 nickel smelters in operation, with an additional 28 under construction and 24 in the planning stages. The majority of investors are from China, with additional investment coming from the United States, Brazil and Australia.

The nickel downstreaming policy has been spruiked by the government as a boon for workers as well as the national balance sheet. As President Joko Widodo said during a visit to a Sulawesi smelter, downstreaming “…will create jobs, for instance, 27 thousand workers can be recruited in this company. Also, it will generate tax income for the country”.

In reality, downstreaming prioritises economic value and tax revenue over worker welfare. Officials have portrayed it as Indonesia’s  path to becoming a developed country, while turning a blind eye to pressing social and labour concerns arising from the policy.

An industry too important to regulate?

A focus on the business practices of two major nickel groups: Tsingshan Holding Group and Jiangsu Delong Nickel Industry reveal the contradictions in the downstreaming policy. The influence of these Chinese companies in Indonesia’s nickel industry is undeniable. They are the backbone of the downstreaming effort, controlling over half of the nation’s nickel production and operating vast smelters employing thousands of workers.

Tsingshan operates two smelter parks: IMIP in Central Sulawesi, and the Indonesia Weda Bay Industrial Park (IWIP) facility in North Maluku. Each park houses dozens of companies involved in the extraction and processing of minerals. Up until now, IMIP in general has employed approximately 120,000 workers, approximately 90% of whom are Indonesian; the rest are Chinese. Meanwhile, IWIP claims to have employed more than 24,000 local workers in 2021 with a goal of 36,000 in 2022.

Jiangsu Delong has three smelting companies: Obsidian Stainless Steel (OSS) and Virtue Dragon Nickel Industry (VDNI) in Southeast Sulawesi, and Gunbuster Nickel Indonesia (GNI) in Central Sulawesi. Since 2023, VDNI and OSS together have employed more than 10,000 workers, and GNI has also employed more than 10,000 workers.

Most of the nickel processing facilities, including those owned by these two groups, have been classified by the Jokowi administration as part of the National Strategic Projects (Proyek Strategis Nasional, or PSN). The majority of Chinese-funded energy and infrastructure projects are included in the PSN (e.g., Jakarta–Bandung high speed rail, industrial parks, toll roads) and receive policy and security prioritisation. In addition, the Widodo administration has strengthened the protection of investments in the nickel and smelting sector through the enactment of the Omnibus Law on Job Creation 2022 and its derivative regulations.

Often hailed as investments that can boost the economy and create jobs, these smelters pose significant problems. These problems include poverty, pollution, tax evasion, low wages, poor working conditions and poor occupational safety and health (OSH) standards. A recent report found that smelters benefit only a handful of people, while workers struggle to make ends meet and neighbouring communities remain impoverished. In 2017, IMIP was reported to be in tax arrears and faced a fine of IDR 60 billion (US$3.7 billion). Similarly, since 2021 VDNI has owed IDR 74.5 billion (US$4.6 billion) in tax arrears and has yet to pay the amount, despite repeated requests from the tax office.

Workplace fatalities and impunity

Another issue of great concern in the nickel smelting sector is the risk of occupational diseases and recurrent fatal accidents at work. According to some reports, since IMIP began its operations in 2015, there have been tens of thousands of cases of respiratory disease among workers. Similar conditions have been experienced by workers at IWIP and OSS. These illnesses are caused by coal pollution, ore dust, and sulphur odours caused by chemicals used in nickel processing.

Other reports also document the recurrence of fatal accidents at nickel processing facilities over the past decade. A database of workplace accidents I compiled from various sources, including company reports and local media outlets, shows that  between 2019 and 2024, 96 accidents occurred at nickel smelters in Indonesia, resulting in the deaths of 97 workers. Of these, 43 accidents occurred at Tsingshan smelters, resulting in the deaths of 56 workers, and 33 accidents occurred at Jiangsu Delong smelters, resulting in the deaths of 26 workers.

The number of work accidents in the nickel and smelting sector is indeed a relatively small percentage of the number of work accidents in Indonesia. In 2021 the number of work accidents was 234,370; in 2022, this figure rose to 265,334; and in 2023, it rose to 350,826.

However, in all cases of workplace accidents, the government often sees them as isolated events born of individual misconduct. In the case of occupational diseases in the nickel and smelting sector, for instance, workers can be blamed for not wearing personal protective equipment properly, whereas in terms of work accidents, workers can be blamed for not following work procedures.

But the issue of workplace accidents is in fact a structural problem. In the nickel and smelting sector, the data shows that workplace accidents have a similar pattern: explosions, fires, and heavy vehicle collisions. This is a systemic problem arising from weak regulations and lack of government supervision, which leads employers to apply poor OHS standards, seen in the form of long working hours, overtime, and the use of dangerous chemical substances and poorly maintained work equipment.

In this context, corporations conduct their business with impunity guaranteed by the government. Such impunity is usually reserved for politically and financially influential investors, especially those whose companies are included in the PSN. Following the fatal accident at IMIP on 24 December 2023, police named two Chinese workers as suspects for causing the explosion in the smelter furnace. One of these suspects was a financial supervisor. Many critics have condemned the police action as an attempt to scapegoat the foreign workers.

In fact, top management should be held accountable because there is a chain of responsibility in the workplace and in the organisation of production in general. Labour inspectors are also responsible for failing to conduct routine inspections in the workplaces where fatal accidents have occurred repeatedly. The legal case of this accident is still unclear. The police have submitted the IMIP case to the prosecutor’s office, but no further action has been taken.

Union demands

An alliance of trade unions at the local level in the nickel smelting area and their affiliates in the national level, along with NGOs, have repeatedly demanded improvements in working conditions in the workplace and the strengthening of OSH systems in the nickel smelters. Some of their more detailed demands include the need for a robust OSH regulation in the mineral processing sector, particularly nickel. Unlike related sectors such as mining, the smelting sector does not yet have such regulations. This type of regulation will ensure clear and systematic oversight from the national level to the workplace level.

In addition, this advocacy coalition is demanding an increase in the number of specialised inspectors in heavy sectors such as mining and smelting, and the assignment of these inspectors near accident-prone industrial areas where they can be easily reached by trade unions. So far, labour inspectors have only been stationed in provincial capitals with limited supervisory capabilities and tend to collude with company managements. The unions are also calling for the establishment of an independent national OSH commission with oversight and investigative powers to monitor business practices, including those in the mining and smelting sector. Indonesia already has a National OSH Council, but it only provides advice to the Ministry of Labour and has no oversight authority over employers.

Finally, unions advocate for the involvement of workers and themselves in the monitoring of OSH in the workplace. Although within-firm OSH committees are mandated by existing regulations and their members consist of both labour and management representatives, these committees often serve only as an advisory bodies to management and lack independent oversight. The involvement of unions makes OSH oversight more independent and there is no fear of retaliation from the workers to report companies’ misconduct.

So far, there has been no policy from the government and smelter companies in response to genuine demands from unions. On the one hand, the Jokowi administration has repeatedly warned smelters to improve working conditions and prioritise worker safety, yet has made no attempts to strengthen labour supervision and law enforcement. On the other hand, smelters have become more aggressive in spending on public relations campaigns: the GNI smelter paid Kompas, a major newspaper, to write a series of coverage on implementation of their corporate social responsibility (CSR) program.

International pressure

As the Widodo administration nears its end, it’s likely that president-elect Prabowo Subianto will maintain his predecessor’s nickel policy without making substantial changes. However, Indonesia’s significant role in the global nickel market has put the country in the international spotlight. International pressure is needed to add strength to the pressure already put forward by workers and trade unions in the country.

After the passage of the US Inflation Reduction Act (IRA) in 2022, some US senators have objected to opening their market to Indonesia, citing issues related to human rights, environmental protection, and labour rights. The IRA restricts access to the US market for essential mineral exports from countries that do not have specific free trade agreements with the United States. Of course, the IRA is inseparable from underlying geopolitical tensions with China, and the trade war and de-risking in response to them. However, Indonesia appears concerned about the Act’s implementation. Jokowi has lobbied Biden on this matter, but as of now, no resolution has been reached.

Australia also needs to put pressure on Indonesia. Australia already has a Modern Slavery Act in place, which requires that certain entities operating there report on the risks of modern slavery within their supply chains, regardless of whether those risks occur domestically or internationally. The Sydney-based company Nickel Industries Limited, is currently investing in IMIP and IWIP. The US State Department’s Trafficking in Persons Report has in 2022 and 2023 highlighted the risks of forced labour in one or more nickel mining companies it says are ‘affiliated with the PRC’s Belt and Road Initiative’, likely an allusion to Tsingshan and/or Jiangsu Delong. Unions and NGOs in Australia should stand in solidarity by putting pressure on the government and its corporations to warn Indonesia of the poor business practices in the nickel and smelting sector.

The growing demand for nickel, driven by the energy transition, will continue to seduce nickel-producing countries and corporations to force their workers to work overtime to increase productivity. Therefore, it’s crucial to continue mounting fierce international and domestic pressure to support unions and workers in fighting for their rights.