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View all search resultsAnalysis: Nickel giants under pressure
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Chimneys spew emissions into the air on July 7, 2024, at the Indonesia Weda Bay Industrial Park in Lelilef, North Maluku. (AFP/Azzam Risqullah)
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ndonesia's nickel smelter boom, long promoted as the centerpiece of its downstream industrialization agenda, is entering a new phase. Through Government Regulation No. 28/2025, the government has moved to restrict new smelter permits, prompting questions over whether this signals a response to overcapacity, a recalibration of its downstream strategy or the start of a more measured and deliberate industrial policy.
After banning nickel raw ore exports in 2020, Indonesia cemented its status as the world's top nickel producer by rapidly expanding smelter capacity. The policy compelled major nickel-consuming countries, particularly China, to relocate their processing activities to Indonesia, triggering a swift build-out of refining facilities. By 2024, Indonesia produced 2.2 million metric tonnes of nickel, commanding more than 63 percent of global supply and strengthening its position as the industry's dominant player.
The new regulation targets smelters producing intermediate nickel products using RKEF or HPAL technology. At present, Indonesia has 54 operating smelters, 38 under construction and another 45 in the planning stage. This rapid expansion, however, has carried consequences. Relentless investment and surging output have created a structural oversupply, driving global inventories higher and nickel prices lower.
Nickel futures prices have become increasingly volatile, trending downward. Data from Trading Economics show nickel futures in London falling to US$14,550 in November, one of the lowest levels since early 2021.
To address these imbalances, the government cut nickel mining quotas by 120 million tonnes this year, reducing global quotas by around 35 percent. Yet despite the significant adjustment, prices remain weak, suggesting that oversupply persists. Supporting this view, nickel inventories at London Metal Exchange warehouses have risen by 90,000 tonnes this year to more than 250,000 tonnes, indicating the global market remains saturated.
On the demand side, global stainless-steel purchases, the primary consumer of nickel, remain sluggish. Although higher nickel use in electric vehicle batteries has provided some support, its usage is very small as the majority of EVs sold in Indonesia, and in the world, are using iron-based lithium ferro phosphate (LFP) batteries, and thus, it has not been enough to absorb the industry's excess output.
The government's latest move appears intended to stabilize the market. By slowing unchecked capacity expansion, the policy could tighten supply, enhance competitiveness and support a potential price rebound.
