Addressing geographical challenges in locating strategic nickel industrial parks: a case study of Indonesia

This paper addresses a real-world facility location problem by optimising the siting of nickel industrial parks in Indonesia, the source of nearly half the world’s nickel supply. A deterministic single-period mixed-integer linear programming model is developed to determine optimal locations, allocations, and processing capacities that minimise total costs. The model incorporates multimodal transportation and actual distance measurements, reflecting Indonesia’s complex island geography. The results identify two optimal industrial park locations to process ore from 139 mines, with a combined capacity of approximately 96 million tonnes. Sensitivity analyses examine transportation costs, setup costs, centralised versus decentralised strategies, and ore supply variability. Findings show that sea transport costs heavily influence location decisions, highlighting the importance of multimodal integration and accurate distance measurement in island-based planning. A fully centralised strategy increases costs by about 10%, and supply reductions exceeding 20% shift optimal location outcomes, underscoring the need for supply resilience in long-term planning. This study presents a novel application of facility location modelling to support large-scale, resource-based development of nickel industrial parks in an archipelagic country, offering practical and policy insights.