MANILA -- Exports of Philippine nickel ore to Indonesia have boomed after the world's largest producer of the commodity slashed production quotas. Manila is now looking to develop its own domestic processing industry, but some people in the industry warn this will be difficult.

In 2025 Indonesia accounted for 62.7% of all nickel mined worldwide, an estimated 2.6 million metric tons, and 45.1% of refined nickel, or 1.6 million tons, according to the International Energy Agency (IEA). The IEA expects Indonesia's volume and share of both products to expand, hitting 73.4% of mined nickel and 50% of refined nickel in 2040. The metal is used in stainless steel and almost half of electric vehicle batteries.

This year, the Indonesian government sharply cut annual mine production quotas, to 270 million wet metric tons from 379 million tons in 2025, to bolster global nickel prices and maintain reserves. The Indonesian Nickel Miner's Association estimates the country's 80 smelters need 315 million tons to run at full capacity. Refiners have turned to the Philippines, which has the world's sixth-largest reserves, to fill the gap.

Imports from the Philippines rose 50% in 2025 to 15.3 million tons, according to Indonesia's statistics agency. And between January and July 2026 they increased 82%, year on year, hitting 11.4 million tons.

"Indonesia's processing industry has expanded significantly, while the availability and quality of some of its domestic ore resources are changing. The Philippines is geographically well positioned to supply this market, particularly for the ore specifications required by Indonesian processors," the Philippine Nickel Industry Association (PNIA) told Nikkei Asia.

The Philippine government has encouraged this development. In August the two countries announced the launch of the "IndoPhil Nickel Corridor," aimed at facilitating exports.

For now, China remains the largest buyer of Philippine nickel ore, accounting for 64% of its $1.66 billion in exports in the 12 months to April, according to the Observatory of Economic Complexity. But industry representatives expect exports to Indonesia, which were just under half those to China in 2025, will continue to grow.

The Philippine government has noticed the developments and wants to develop its own nickel processing industry. "We take our example from what Indonesia did," said President Ferdinand R. Marcos Jr., speaking to the media in August. But industry insiders say this may be tricky.

That month he also signed an executive order on critical minerals which, among other measures, requires government agencies to develop a strategy to promote mineral processing industries. In 2025, a law to ban exports of nickel ore by 2030, as Indonesia did in 2020, was also passed but was ditched under industry pressure in June.

Some in the Philippines anticipate an opportunity, although not an immediate one, due to Indonesia's developed processing industry. "So, we're waiting for Indonesia to close, because I know that they [are] already mined out," one Philippine industry leader told Nikkei Asia.

The Philippines' nickel reserves are, as yet, relatively untouched. Just 3% of the country's total estimated resources have been tapped, according to the PNIA.

However, the idea that Indonesian reserves are nearly exhausted is contested. Indonesia still has an estimated 62 million tons of nickel in the ground, according to estimates by the United States Geological Survey. The Philippines is estimated to have only 4.8 million metric tons.

Furthermore, "[r]eserves and resources are not the sum total of all minerals in the ground. They are the amount that has been proven or measured, according to certain standards of geological and economic confidence," Ian Hiscock, a specialist in critical minerals at the Energy Shift Institute, a think tank focused on Asia's energy transition, told Nikkei Asia.

"The true amount of economically extractable minerals is often much higher than what has been delineated," he added. "Indonesia's endowment of nickel and bauxite likely exceeds what would be implied by dividing reserves by annual production."

"Import volumes from the Philippines are more related to uncertainty around RKAB [mine production license] approvals and pricing of domestic ore than geology." Even proponents of developing nickel processing in the Philippines admit it would be challenging. Before any major decisions are made, the Philippines needs to further explore its reserves to establish the average grade of nickel ore, the Philippine industry leader told Nikkei Asia.

As things stand, however, the person argued that electric arc furnaces, which produce nickel mainly used for steel, would probably be more suitable than the high-pressure acid leach method, which in Indonesia is used to produce higher-purity nickel for the electric vehicle supply chain.

Other issues also need to be addressed. "If the Philippines wants to develop a competitive domestic processing industry, the priority should be to make the country an attractive place to invest in processing," said the PNIA. "That means addressing permitting, power costs, infrastructure and logistics, access to capital, fiscal and nonfiscal incentives, workforce capabilities and long-term certainty of ore supply." Joseph Rachman is a contributing writer.