Indonesia Nickel Smelters in Sulawesi — 2026-10-23
Indonesian nickel prices rallied past $16,000 per tonne this week as Chinese producers in Sulawesi and Halmahera discussed coordinated output cuts to combat oversupply. Simultaneously, the government’s revised 2026 mining quota (RKAB) of 290 million tons has triggered warnings of a severe supply deficit for local smelters, while new investigations highlight environmental and safety failures in the sector.
Top developments
Chinese Producers Weigh Coordinated Output Cuts
On October 21, 2026, LME nickel prices rose for the fourth consecutive day, breaking past the $16,000 per tonne mark following reports that top executives from Chinese nickel producers in Indonesia planned meetings to discuss coordinated production cuts. The proposed measures include potentially halving the output of Mixed Hydroxide Precipitate (MHP) by 50% and reducing Nickel Pig Iron (NPI) production by 20% at facilities in industrial parks like Morowali. These cuts are driven by slumping prices, rising production costs due to sulfur shortages, and tighter mining quotas, aiming to tighten supply and stabilize margins for battery-grade nickel intermediates.
RKAB Revisions Spark Smelter Supply Deficit Fears
The Ministry of Energy and Mineral Resources (ESDM) approved a revised 2026 RKAB nickel ore production target of approximately 290 million tons, a figure significantly lower than the 320–350 million tons estimated required by downstream smelters. Industry analysts warn that this gap could lead to a severe supply deficit, forcing smelters to either reduce utilization rates or increase reliance on imported ore. The restriction is intended to support nickel prices by leaving saleable material in the ground, but it risks pressuring the profitability of standalone smelter operations that lack captive mines.
Record Nickel Ore Imports from the Philippines
As domestic quotas tighten, Indonesia’s imports of nickel ore from the Philippines are set to hit a record high in 2026, marking the fourth consecutive year of growth. This surge is a direct response to the local supply shortfall created by the government’s decision to cap mining quotas below smelter demand. The trend highlights the growing interdependence of regional supply chains despite Indonesia’s policy of "value over volume" in domestic extraction.
Local view
Local financial media outlets, including Kontan and Media Nikel Indonesia, are focusing heavily on the impact of the revised RKAB on listed companies (emiten) in the nickel and coal sectors. Kontan reports that the quota limitations could significantly suppress corporate profits, as volume constraints directly affect sales revenue for mining-focused firms. Meanwhile, Bloomberg Technoz highlights the risk of nickel ore prices collapsing if the government further controls smelter production volumes, arguing that current market dynamics are already fragile due to the imbalance between authorized mining volumes and smelter capacity.
Context & numbers
- Nickel Price: LME nickel traded around $16,000 per tonne on October 21, 2026, driven by short-covering and supply cut expectations.
- 2026 RKAB Quota: The government approved a revised nickel ore production quota of ~290 million tons, down from previous approvals of ~379 million tons in 2025.
- Smelter Demand: Estimated smelter demand for 2026 is between 310 and 400 million tons, creating a projected deficit of up to 110 million tons.
- Proposed Cuts: Rumored production cuts include 50% for MHP and 20% for NPI, which lifted the SHFE nickel benchmark contract by 3.05% on October 21.
On the radar
- ESG Compliance Barriers: A new report indicates that Indonesia’s nickel industry currently meets only 31% of European environmental, social, and governance (ESG) standards, posing significant barriers to entry for battery-grade nickel into the EU market.
- Supply Chain Investigations: A year-long investigation by VoxEurop has linked Indonesian nickel from biodiversity sanctuaries to major European automakers like Volkswagen, exposing "dirty nickel" trails that could trigger stricter sourcing audits for EV manufacturers.
- LME Rainforest Concerns: An NGO has called on the London Metal Exchange to take a stronger stance against companies sourcing nickel linked to rainforest depletion in Indonesia, potentially affecting the "London Nickel" standard used for EV battery contracts.
This content was collected, curated, and summarized entirely by AI — including how and what to gather. It may contain inaccuracies. Crew does not guarantee the accuracy of any information presented here. Always verify facts on your own before acting on them. Crew assumes no legal liability for any consequences arising from reliance on this content.
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