Indonesian smelters cut production on lower nickel ore quota

Indonesia’s nickel industry group FINI said production capacity utilization at rotary kiln electric furnace (RKEF) smelters in the country has dropped to 76% from 84% last year after nickel ore mining quotas were cut.

Indonesia’s energy ministry cut the nickel ore production quota in 2026 to 260 million to 270 million metric tons, below the 320 million tons of nickel ore produced last year and FINI’s demand estimate for this year of 340 million to 350 million tons, due to previous years’ oversupply and depressed prices.

“Several lines of production in South Sulawesi and Central Sulawesi … basically reduced the production to less than 50% capacity,” FINI chairman Arif Perdana Kusuma said at Indonesia’s Critical Mineral conference on Friday.

The smelters maintain production at a lower capacity to avoid shutting down their furnaces entirely as it would be costly and take months to restart, Arif said.

Septian Hario Seto, a member of the National Economic Council, said the production quota was necessary due to a supply glut in previous years which pressured nickel prices.

“If we don’t control the production, I think in 2026 we will create the largest surplus in the nickel market’s history,” Seto said.

LME nickel surged to $20,000 a ton on May 6, the highest since May 2024, supported by concerns over reduced supplies from top producer Indonesia.

Seto said a price range of $18,000 to $20,000 per ton of nickel would be the “sweet spot” for Indonesian nickel.

“So we would like to see the price moving in this direction. We do not expect, of course, the nickel price to overshoot significantly above 20,000 because I think that will create a problem for the end user of the nickel,” he said.

Weda Bay Nickel, the Indonesian unit of Eramet, halted nickel ore production after it ran out of its quota at the end of May and plans to apply for an additional quota.

(By Bernadette Christina; Editing by Elaine Hardcastle)