Chinese nickel producers in Indonesia are planning coordinated production cuts as weaker prices and rising operating costs make it harder for smelters to remain profitable, according to Indonesia Business Post, citing Reuters. The proposed reductions would target two key products: mixed hydroxide precipitate (MHP), an intermediate used to make electric-vehicle battery materials, and nickel pig iron (NPI), which is mainly used to produce stainless steel. Producers have discussed cutting MHP output by as much as 50% and NPI production by around 20%, Reuters reported on October 23.
Nickel Industries Managing Director Justin Werner said producers at the Indonesia Morowali Industrial Park (IMIP) in Central Sulawesi were expected to coordinate the reductions. The final volumes and duration of the cuts have not been confirmed. The move comes as Indonesia's nickel industry faces pressure from several directions.
Government restrictions have reduced mining quotas at some operations, dry weather linked to El Niño has disrupted water supplies at certain smelters, and higher input costs have eroded profits as nickel prices have fallen. Reuters reported that nickel prices dropped nearly 25%, from around US$20,000 per tonne to US$15,070 in the week before October 23, after reaching a peak earlier in 2026. NPI prices have also weakened, with the product trading at 1,009 yuan (US$151) per nickel unit on October 21, down from more than 1,100 yuan in early September.
Costs have also risen for some producers. Higher sulphur prices have made it more expensive to operate high-pressure acid leaching (HPAL) plants, which extract nickel and cobalt from ore to produce MHP for battery supply chains. HPAL operators are therefore exposed to sulphur and other processing costs, while NPI producers face ore prices, energy and operating expenses, and demand from stainless steel manufacturers.
Producers with their own mines may have greater control over raw material supplies, although they remain subject to government mining quotas, whereas smelters relying on external suppliers may be more exposed to higher ore prices or shortages. Indonesia has reduced its overall nickel ore production allocation for 2026 compared with 2025, but the impact varies by mine. One prominent example is PT Weda Bay Nickel, a joint venture involving France's Eramet, China's Tsingshan and Indonesian state-owned miner Antam.
The mine's initial 2026 production quota was set at 12 million wet metric tonnes, down from 42 million tonnes in 2025, and Eramet has said it would seek a higher allocation, Reuters reported. Water constraints add a further layer of pressure. IMIP confirmed in September that insufficient water had forced some smelters to cut NPI production, and Werner said Nickel Industries operated its Indonesian NPI production at about 75% of capacity in October because of dry conditions.
The company also delayed the full ramp-up of another nickel and cobalt project due to insufficient rainfall. The proposed cuts could support prices if they remove enough supply from the market. Lower MHP output could tighten availability of battery materials, while NPI reductions could reduce supply for stainless steel producers.
However, production cuts do not guarantee a price recovery. The International Nickel Study Group has forecast a global nickel surplus for 2026, meaning production is expected to exceed consumption. Indonesia is the world's largest mined nickel producer, and if the surplus persists, cuts at some Indonesian facilities may not be enough to lift prices sustainably.
Lower output also reduces sales volumes, while labour, maintenance and plant operating costs may not fall at the same rate as production. The outcome will depend on how many producers participate, how much output is actually removed, how long the reductions last, and how demand from the battery and stainless steel industries evolves. For Indonesia's nickel industry, the central challenge is increasingly about securing reliable supplies of ore, water and other inputs while keeping costs low enough to remain profitable, not simply expanding processing capacity.
Source: Indonesia Business Post (article by Julian Isaac, published 26/10/2026), citing Reuters reporting of October 23, 2026, and the International Nickel Study Group.
Source: indonesiabusinesspost.com