Indonesia: RKEF utilisation declines as nickel ore quota cuts tighten supply

• RKEF utilisation falls to 76% amid ore shortages
• Government signals preferred nickel price range

SteelDaily: Indonesia’s nickel industry is facing growing pressure as tighter nickel ore mining quotas constrain raw material availability and reduce operating rates at ferronickel and nickel pig iron (NPI) smelters.

According to SMM and industry sources, the utilisation rate of Indonesia’s rotary kiln electric furnace (RKEF) smelters has declined to 76% in recent months from 84% in 2025. The decline follows the government’s decision to limit 2026 nickel ore mining quotas (RKAB) to 260-270 million tonnes (mnt).

The approved quota remains significantly below Indonesia’s 2025 nickel ore production of 320 mnt and well short of the 340-350 mnt of ore demand projected by the Indonesian Nickel Smelters Association (FINI) for domestic smelters this year.

Smelters operate at reduced capacity

Industry participants reported that several RKEF production lines in South Sulawesi and Central Sulawesi are operating at less than 50% capacity due to constrained ore supply. Market sources noted that producers are reluctant to fully shut furnaces because restarting operations requires substantial time and cost, prompting many facilities to maintain minimum operating levels.

Government aims to stabilise nickel market

Indonesia’s policymakers view the quota restrictions as a measure to prevent excessive oversupply in the nickel market. According to officials from the National Economic Council, the government’s preferred nickel price range is between $18,000/t and $20,000/t.

Authorities believe prices within this range would support industry sustainability while avoiding excessive cost pressures for downstream consumers, particularly stainless steel producers and battery manufacturers.

Outlook

Indonesia’s tighter ore supply policy is expected to keep nickel ore availability constrained and support nickel prices in the near term. Lower RKEF operating rates could limit NPI and ferronickel output, providing additional support to the nickel market. However, any significant rise above the government’s preferred $20,000/t level may increase cost pressures across the stainless steel supply chain and dampen downstream demand.

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