Nickel Downstreaming and the Risk Challenges Behind It
Nickel downstreaming is one of the Indonesian government’s priority programs to increase the added value of natural resources and strengthen Indonesia’s position in the global supply chain for electric batteries and electric vehicles. From mines in Sulawesi to smelters and battery raw material factories in the industrial areas of Morowali, Halmahera, and Pomalaa—this entire process presents both significant economic opportunities and complex risks.
Despite this enormous potential, each stage of downstream processing carries risks: factory fires, furnace explosions, machine failures, environmental pollution, and global price fluctuations. All of this requires a comprehensive risk management and insurance system to protect billions of dollars in investments from significant financial losses.
In this context, the role of professional insurance brokers like PT Liberty and General Insurance Broker (L&G) becomes crucial. L&G acts not only as a liaison between clients and insurance companies but also as a strategic risk advisor, helping companies in the nickel sector effectively assess, manage, and transfer risk.
Contact L&G Insurance Broker now at Phone number 08118507773 for a free consultation before the risks haunt your business.
Complexity of Risks in Nickel Downstreaming
Nickel downstream processing is more than just a conventional industrial process. It encompasses various stages, from mining and transporting raw materials, processing in smelters, and distributing processed products such as ferronickel, nickel matte, and battery precursors.
Each stage has a different risk profile:
- Mining Stage (Upstream):
- Mine landslide or heavy equipment accident
- Damage to conveyors and infrastructure
- Disruption of fuel and electricity supply
- Processing Stage (Smelter and Refinery):
- Risk of fire and explosion in furnace
- Failure of cooling and electrical systems
- Machinery breakdown
- Risk of production downtime causing major losses
- Downstream and Logistics Stage:
- Damage or loss during delivery of processed products
- Risk of pollution or chemical spills during transportation
- Supply chain disruptions due to extreme weather
- Financial and Reputational Risks:
- Global nickel price fluctuations
- Breach of long-term contract
- Legal liability and environmental claims
Without a strong risk management system and insurance protection, a single incident can cause millions of dollars in losses, disrupt operations, and even stop entire projects.
Risk Management Steps
Risk management in the nickel industry must be carried out systematically and in an integrated manner. This process includes:
- Risk Identification
The first step is to recognize potential hazards across all lines of operations.
L&G Insurance Broker assists companies through risk surveys and site assessments, including inspections of heavy equipment, electrical networks, fire protection systems, and workplace safety protocols.
- Risk Analysis and Assessment
Once the risks are identified, the next step is to assess the potential magnitude of the loss and its frequency.
For example:
Furnace failure can cause losses of IDR 50–100 billion due to 2 weeks of downtime.
A fire in a raw materials warehouse could disrupt supplies for the entire production line.
L&G helps quantify these risks and prepares analysis reports that form the basis for insurance program design.
- Control and Prevention
These steps include implementing a safety management system and worker training. L&G also provides technical recommendations such as:
- Instalasi automatic fire suppression system
- Use of gas detectors in the smelting area
- Routine safety audits and electrical system tests
- Risk Transfer through Insurance
Not all riskThis is where insurance becomes an important solution for transferring financial risk to insurance companies.
However, the policy design must be precise to cover all potential risks specific to the nickel industry. L&G’s role is to design a policy that truly fits the project’s needs and characteristics.
Types of Insurance Required in Nickel Downstreaming
Here are some of the main types of insurance that companies in the nickel downstream sector must consider:
- Construction/Erection All Risks (CAR/EAR) Insurance
Protecting smelter construction projects from the risks of fire, explosion, natural disasters, and worker errors during the construction period.
- Contractors’ Plant and Machinery (CPM) Insurance
Provides protection for heavy equipment such as cranes, excavators, and dump trucks from damage or accidents.
- Property All Risks (PAR) Insurance
Protect fixed assets (buildings, furnaces, machines, electrical installations) from fire, explosions, or natural disasters.
- Machinery Breakdown (MB) dan Business Interruption (BI)
Covers losses due to machine damage resulting in production stoppages and loss of income.
- Public Liability dan Environmental Liability Insurance
Provides protection if the company causes damage to third parties or the surrounding environment.
- Marine Cargo Insurance
Protects against risks during the transportation of raw materials and finished products from the factory to the port or customer.
- Employee Benefit dan Personal Accident Insurance
Protecting the workforce who are the backbone of the company’s operations.
With over 30 years of experience, L&G Insurance Broker has proven its ability to tailor a combination of insurance policies to the specific needs of heavy industries such as nickel, power plants, and oil and gas.
Case Study – Furnace Failure at a Nickel Smelter
A nickel smelter in the Morowali industrial area experienced damage to its main furnace due to a power surge. This damage resulted in 18 days of production downtime and losses of over Rp120 billion.
However, thanks to the placement of Machinery Breakdown and Business Interruption insurance arranged by an experienced broker, the company managed to obtain full compensation according to the agreed claim value.
As an accompanying broker:
- Prepare a claim report with complete technical data and evidence of damage.
- Negotiate with the loss adjuster and insurance company to ensure the claims process runs smoothly.
- Ensuring claims payments are made on time so operations can return to normal.
- This is a real example of how the role of a professional insurance broker becomes a savior in a critical situation.
Claim Settlement Process with Insurance Brokers
In practice, claims settlement in large industries isn’t as simple as filing a loss report. It requires technical expertise and intensive communication between the client, the loss adjuster, and the insurance company.
The following are the stages that are usually facilitated by L&G:
- Initial Notice (Notice of Loss)
Immediately after the incident, L&G assisted the client in preparing an initial report to ensure that the claim rights were not lost.
- Investigation and Documentation
L&G’s technical team conducted field verification, collected evidence, and prepared loss estimates.
- Negotiations with Insurance and Loss Adjusters
Brokers act as intermediaries who fight for clients’ interests, ensuring claims are received fairly.
- Claim Settlement and Payment
L&G ensures that payments are made according to the policy terms and agreed time.
With the support of a digital claims management system and an international partner network, L&G can expedite the entire claims process without compromising accuracy and regulatory compliance.
L&G Insurance Broker’s Advantages in the Nickel Sector
Why should nickel downstream companies partner with PT Liberty and General Insurance Broker (L&G)?
- Technical and Industrial Expertise
L&G has extensive experience in handling smelters, power plants, EPC and energy logistics projects.
- Global Network and Reinsurance
L&G collaborates with leading international brokers and reinsurance companies, so the protection provided has a large capacity.
- Consultative Approach
Not only selling policies, L&G provides risk analysis and prevention recommendations to reduce the frequency of claims.
- Professional Claims Management
L&G’s claims team is known for being fast, proactive and on the side of the client’s interests.
- Compliance and Transparency
L&G is officially licensed by the Financial Services Authority (OJK) and adheres to the principles of integrity and transparency.
Real Benefits for Downstream Investors and Developers
With the support of the right insurance broker, nickel downstream companies will gain many strategic advantages:
- Full financial protection against potential major losses
- Investment certainty in the eyes of partners and lenders
- Compliance with EPC contract and lender requirements
- Accelerate business recovery when an incident occurs
- Positive image in the eyes of the public and regulators
As global pressure for the implementation of Environmental, Social, and Governance (ESG) principles increases, L&G is also playing a role in helping clients align risk management strategies with sustainability standards.
Conclusion: L&G, a Strategic Partner in Protecting the Future of Indonesia’s Nickel Industry
Nickel downstreaming is a major step for Indonesia towards a high-tech industrial era. However, its success is determined not only by production capacity but also by the ability to professionally manage risks and protect investments.
Insurance brokers such as PT Liberty and General Insurance Broker (L&G) are here to ensure that every nickel downstream project has a strong, efficient, and sustainable protection system.
With a comprehensive approach—from risk identification and policy design to claims settlement—L&G is a strategic partner for the national nickel industry in facing global business uncertainty.
If you are a smelter developer, EPC contractor, or investor in a nickel downstream project in Indonesia, don’t let risk stop your growth.
Contact PT Liberty and General Insurance Broker (L&G) for a free consultation on comprehensive risk management and insurance programs.
HOTLINE L&G 24 JAM: 0811-8507-773 (PHONE – WHATSAPP – SMS)
Website: lngrisk.co.id
Email: halo@lngrisk.co.id
