- El Nino raises concerns over hydropower availability
- Nickel smelters face potential power shortages
Indonesia’s nickel smelting sector is facing a potential new supply-side risk as El Nino-driven dry conditions threaten hydropower generation, particularly at smelters that rely heavily on hydroelectricity. Indonesia’s Ministry of Energy and Mineral Resources (ESDM) is monitoring the impact of lower rainfall on nickel processing and smelting operations, as reduced water availability could affect electricity supply to energy-intensive facilities.
South Sulawesi smelter faces power constraints
An operational disruption has already been reported at PT Bumi Mineral Sulawesi (BMS) in Luwu, South Sulawesi, where reduced hydropower availability has affected its RKEF (Rotary Kiln Electric Furnace) operations. Production at the company’s No. 1 RKEF line has reportedly been reduced, while around 570 employees have been placed on temporary furlough.
BMS operates a ferronickel smelting project with annual capacity of around 33,000 t, making the disruption a potential regional supply concern.
Dry season adds further risk
Indonesia’s Meteorological, Climatological and Geophysical Agency (BMKG) has warned that the 2026 dry season could be drier and longer than usual, with the peak concentrated between July and September. The agency has also warned that El Niño conditions could persist into early 2027.
Rainfall in several parts of Indonesia is expected to remain below average in September, while dry conditions are expected to persist across parts of Sulawesi. This could further pressure water availability for hydroelectric power generation.
Potential impact on nickel supply
Hydropower shortages could become an additional supply-side variable for Indonesia’s nickel industry if dry conditions persist. Prolonged electricity constraints could reduce operating rates at affected RKEF and other power-intensive smelters, potentially impacting ferronickel, NPI and downstream stainless steel raw-material supply.
However, the current impact appears to be concentrated at individual facilities, and the extent of any broader disruption will depend on rainfall patterns, reservoir levels and alternative power availability.
Outlook
The power-supply situation is emerging as another factor to monitor alongside nickel ore quotas, raw material costs and smelter economics. Continued dry weather or prolonged El Nino conditions could increase the risk of production interruptions at hydropower-dependent nickel facilities, potentially providing some support to nickel and related raw-material prices.
Market participants will closely watch hydropower generation, rainfall levels, smelter operating rates and further production disruptions across Indonesia.
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