Indonesia: Will ensure adequate nickel supply

Indonesia, the world's largest nickel exporter, has sent a sobering message to struggling battery metal producers elsewhere: don't expect any meaningful recovery in nickel prices. Indonesia's Deputy Minister for Maritime Affairs and Investment Coordination, Septian Hario Seto, who oversees the nickel processing industry, said the LME nickel price was unlikely to rise above US$18,000 (RM85,842) per tonne.

Indonesia, the world's largest nickel exporter, sent a sobering message to struggling battery metal producers elsewhere, according to news on February 28: Don't expect any meaningful recovery in nickel prices.

Indonesia's Deputy Minister for Maritime Affairs and Investment Coordination, Septian Hario Seto, who oversees the nickel processing industry, said the LME nickel price was unlikely to rise above US$18,000 (RM85,842) per tonne.

He said Indonesia will ensure that the market is fully supplied to reduce costs for EV manufacturers.

He said in an interview. "All nickel producers elsewhere have to understand this concept well, and the Indonesian government's aim is to find a balance so that nickel demand, especially for electric vehicles, can be adequately supplied."

Nickel prices plunged around 45% in 2023, briefly falling below US$16,000 a tonne earlier this month, as Indonesian supply surged to more than 50% of the global total due to weak demand. Nearly half of the world's nickel operations are unprofitable near recent price levels, forcing miners in Australia and New Caledonia to consider closing nickel projects.

He said nickel prices should remain above $15,000 a tonne because Indonesian smelters would be forced to cut production if nickel falls below $15,000 a tonne.

Although battery metal prices have been falling, nickel demand will increase in the long run due to the popularity of electric vehicles.

Indonesia has already started production of nickel cobalt hydroxide (MHP), a nickel product that is directly targeted at car producers. The Indonesian government expects the total MHP capacity of the country's smelters to double in the next three years.

He said this should be enough to meet the growing demand from the electric vehicle industry. Indonesia believes that controlling prices in the EV industry is key to ensuring that nickel-based batteries remain competitive with low-cost alternatives, including lithium iron phosphate. "We know what happened to cobalt three or four years ago." He was referring to the surge in cobalt prices at the time, prompting buyers to consider other options. "We have to make sure that everyone in the ecosystem has good profitability and not excessive profitability." He said Indonesia's MHP production is increasingly being linked to offtake deals. The production of this chemical is much less carbon-intensive than the production of battery-grade nickel, which consumes coal during the production process.

Several European automakers have been actively reaching out to Indonesian mining companies to lock in nickel supply. Indonesia has been seeking a critical minerals agreement with the United States to ensure that nickel products originating in Indonesia can play a key role in the U.S. electric vehicle supply chain.