In a strategic move aimed at rebalancing global metals markets, the Indonesian government to significantly reduce production at the Weda Bay Nickel mine, the world's largest nickel mine. This decision is part of a broader effort to reduce the global supply of nickel and thus support prices, which have fallen sharply over the past two years due to overproduction.
According to sources cited by Bloomberg, Indonesian authorities have informed Wida Bay Nickel that its approved production quota for this year will be only 12 million tons of nickel ore, a huge decrease compared to the previous target of 42 million tons for 2025. This massive mine is located on Halmahera Island in North Maluku province and is owned by a consortium comprising China's Tsingshan Holdings Group, France's Eramet, and Indonesia's Anika Tambang.
Historical context and the rise of Indonesia as a dominant power
Indonesia’s dominance of the nickel market was no accident. Over the past decade, Jakarta has pursued an ambitious industrial policy known as “downstreaming,” which included a 2020 ban on the export of unprocessed nickel ore. This ban forced global companies to build smelters and processing plants within Indonesia, triggering a massive investment boom, primarily from China. As a result, Indonesia transformed from a mere exporter of raw materials into the world’s largest producer of refined nickel and its intermediate products, such as nickel iron ore (NPI) and chemicals used in electric vehicle batteries. This rapid expansion flooded the global market, causing prices to plummet by more than 40% in 2023 alone.
Global and regional impacts of the decision
Indonesia’s decision to cut production has broad global implications. The previous price collapse rendered many mines in other countries uncompetitive, leading to plant closures and project freezes in Australia and New Caledonia, both traditional nickel producers. Jakarta’s move is seen as an attempt to restore price stability and protect its mining sector, which has become a cornerstone of its economy. Globally, stainless steel manufacturers (the largest consumers of nickel) and electric vehicle makers are watching this development closely. While lower prices have been beneficial for them in reducing production costs, any sustained price increase could be passed on to consumers in the form of higher final product costs.
It is worth noting that demand for nickel in the electric vehicle battery sector has recently been disappointing due to slowing growth in electric vehicle sales in some markets and the shift towards alternative, nickel-free battery chemistry, such as lithium iron phosphate (LFP) batteries. Nevertheless, nickel remains a vital component for high-performance batteries that offer extended driving range. Indonesia's ability to control global supply gives it considerable influence, making its decisions closely watched worldwide as it strives to strike a delicate balance between increasing revenue and maintaining market stability.
