Smelters at Indonesia's Morowali Industrial Park, a major nickel-processing hub located on the island of Sulawesi, have been forced to cut production due to an El Niño-driven drought that has reduced water supplies needed to cool and protect equipment. According to people familiar with the matter, the industrial park informed companies over the weekend about the required production reductions of nickel pig iron, a raw material used in stainless steel manufacturing. The production cut could affect approximately 100,000 tonnes of NPI output, which represents a significant portion of the facility's installed annual capacity of about 4.2 million tonnes, or 350,000 tonnes per month, based on estimates from Wood Mackenzie Ltd.
This reduction comes as the Morowali Industrial Park, which is majority owned by Chinese nickel giant Tsingshan Holding Group Co and hosts numerous tenant firms, had previously warned that production could be cut by 30% to 40% if water conditions did not improve. The production cuts may provide support to nickel prices, which have experienced a decline of approximately 18% on the London Metal Exchange from a peak in early May. Following the announcement of the production reduction, LME nickel rose as much as 1.1% on Tuesday.
Indonesia remains the world's largest producer of nickel, accounting for more than half of global output. The metal is used in both stainless steel production and electric vehicle batteries, with much of Indonesia's production processed at industrial parks such as Morowali. The disruption at Morowali exemplifies how the strengthening El Niño weather pattern is affecting the global economy.
Indonesia is currently dealing with forest fires and widespread haze resulting from unusually dry weather conditions associated with the El Niño pattern, with the smoke spreading to other parts of Southeast Asia. IMIP representatives and Tsingshan officials did not respond to requests for comment regarding the production cuts. Source: The Edge Markets (September 22, 2026)
Source: theedgemarkets.com