Indonesia raises nickel mining quota, supply pressure on prices to escalate

• Indonesian producers struggle with dull demand from China
• Weak margins prompt output cuts, shift to value-added products

In July 2025, the Indonesian government approved a massive 25-year nickel mine quota of 364 million tonnes (mnt) – a figure nearly three times the country’s current annual production of 120 mnt. While this move signals Indonesia’s ambition to solidify its dominance in the global nickel market, it comes at a time when prices of both nickel ore and nickel pig iron (NPI) are steadily weakening due to persistent oversupply and cautious demand.

Although a temporary supply squeeze exists due to Indonesia’s rainy season, market participants expect further downward pressure on prices, as more quota approvals loom and smelter profitability remains low.

High-grade NPI from Indonesia averaged RMB 905.3/t ($126/t) last week, down RMB 4.5/t ($0.62/t) w-o-w, while the FOB index prices slipped to $110.4/t.

Smelters scale down output, demand remains tepid

• Some Indonesian smelters are scaling back production or switching to high-purity nickel matte, reacting to high smelting costs and weak profit margins.
• In China, despite a modest rebound in stainless steel prices, steelmakers remain conservative in their NPI purchases, wary of low spot prices and ample inventories.

The approval of a record quota underscores Indonesia’s commitment to nickel mining, but the disconnect between quota and actual production, combined with weak prices, highlights the challenges facing the sector. Unless demand rises sharply or production is curtailed, nickel ore and NPI prices are likely to remain under pressure, affecting global supply chains and profitability for miners and smelters alike.