Indonesia's Energy Ministry Cuts Nickel Ore Quotas, Nickel Price Falls Below $17,000 per Ton in September

en.Wedoany.com Reported - On September 1, the three-month nickel price on the London Metal Exchange (LME) fell to approximately $16,570 per ton, a low since July. Meanwhile, Indonesia's 2026 nickel ore production quotas have been significantly tightened compared to 2025, and capacity utilization at domestic nickel smelters has already declined. However, increased nickel ore imports from the Philippines and persistently high LME inventories mean that the supply contraction at the ore stage has not yet fully transmitted to the refined nickel market.

Indonesia's approved nickel ore Work Plan and Budget (RKAB) for 2026 stands at approximately 260 to 270 million tons, compared to 379 million tons approved for 2025, a decline of nearly 30 percent. Indonesia's nickel industry association FINI previously estimated that the country's 2026 RKEF and HPAL nickel processing capacity of approximately 2.7 million tons would require around 340 to 350 million wet metric tons of nickel ore as feedstock, meaning the current domestic ore quota falls short of smelting operations running at full capacity.

The tightening of ore supply has already been reflected in smelting activity levels. Data released by FINI shows that capacity utilization at Indonesia's rotary kiln-electric furnace (RKEF) smelting facilities has fallen from 84 percent in 2025 to 76 percent, with output at some production lines in South Sulawesi and Central Sulawesi dropping to below 50 percent of design capacity. In March this year, FINI projected that full-year nickel processing capacity utilization could decline to 70–75 percent.

Weda Bay Nickel has been more directly affected by the quota cuts. The mine received an initial nickel ore production quota of only 12 million wet metric tons for 2026, compared to an initial 32 million wet metric tons in 2025, which was later raised to 42 million wet metric tons. With the 2026 initial quota expected to be exhausted by mid-May, the company had previously prepared to place the mine into care and maintenance and applied for an increase in its RKAB allocation. Nickel processing facilities such as HPAL plants in the surrounding industrial park require more than 100 million wet metric tons of ore.

Imported ore is partially filling the supply gap. Data from Indonesia's statistics agency shows that nickel ore imports from the Philippines reached 11.4 million tons in January–July 2026, up approximately 67 percent year-on-year, compared to 6.82 million tons in the same period of 2025. The value of Philippine nickel ore imports in the first seven months of this year reached $696.5 million. FINI estimated earlier this year that, due to tightened domestic quotas, Indonesia's nickel ore imports could rise to 50 million tons in 2026, with approximately 30 million tons coming from the Philippines.

While ore imports have increased, refined nickel inventories remain at elevated levels. LME nickel inventories rose to approximately 268,300 tons in August, and the three-month nickel price stood at around $16,570 per ton on September 1, below the $20,000 per ton level reached in May. The resulting market condition is that domestic ore supply in Indonesia and some smelting companies have already been affected by the RKAB tightening, but Philippine ore supplementation and refined nickel inventories are still cushioning the impact of supply contraction on international nickel prices.

Indonesia's Ministry of Energy and Mineral Resources stated at the end of June that applications for RKAB adjustments submitted by companies were still under evaluation, and no decision had been made to comprehensively relax nickel ore production quotas. The government said that any subsequent adjustments would be carried out through the formal assessment mechanism, rather than a direct overall quota expansion.