Indonesia’s Nickel Production Curbs Leave Market Unconvinced as Global Surplus Persists

JAKARTA/LONDON, September 23, 2026: Indonesia’s efforts to curb nickel production have failed to fully convince the global market that the country can eliminate the persistent supply surplus, even as tighter mining quotas and environmental controls have supported prices earlier this year. Indonesia accounts for more than 60% of global nickel output, giving its production policies significant influence over international prices.

Jakarta has sought to rein in the sector by reducing mining quotas, strengthening environmental oversight and adjusting ore-pricing policies. The government’s commitment to cut mining quotas from 379 million metric tons in 2025 to around 250–260 million tons helped push London Metal Exchange nickel prices to about $20,000 per tonne in May. However, prices have since fallen back toward $16,500 per tonne, reflecting renewed market concerns about supply.

Production cuts face a major challenge

One of the key difficulties for Indonesia is balancing lower mining output with the needs of its rapidly expanding domestic processing industry. Several smelters require steady supplies of nickel ore, and some operators have responded to tighter domestic availability by increasing imports.

Indonesia’s imports of nickel ore from the Philippines rose 50% to 15.3 million tonnes in 2025, while imports reached 11.4 million tonnes between January and July 2026, up 67% year-on-year, according to World Bureau of Metal Statistics data cited by Reuters. Smaller volumes are also arriving from the Solomon Islands.

The Indonesian Nickel Miners Association estimates that the country’s nickel processing plants would require about 315 million tonnes of ore annually if operating at full capacity, highlighting the challenge of matching mining quotas with processing demand.

Global inventories remain high

The impact of Indonesia’s production restrictions is also being diluted by large inventories elsewhere in the market. Combined nickel stocks held by the London Metal Exchange and Shanghai Futures Exchange are around 478,000 tonnes, equivalent to roughly seven weeks of global consumption, according to Reuters.

China has also increased refined nickel imports. The country imported approximately 170,000 tonnes during the first seven months of 2026, a 28% increase from the same period last year and the highest pace since 2016.

Demand remains crucial

The nickel market is now looking beyond supply restrictions toward the strength of global demand. Stainless-steel production increased by about 5% year-on-year during the first half of 2026, while electric-vehicle sales have continued to grow in many markets outside the United States.

However, sizeable inventories mean that even stronger short-term demand may initially be met from existing stocks rather than immediately translating into higher prices.

Indonesia’s production controls have therefore reduced the scale of the potential surplus, but the market remains focused on whether those restrictions will be maintained and whether global demand can absorb existing inventories. The Indonesian government has also emphasized that revisions to nickel production quotas must be evaluated against industrial requirements, market conditions and supply-chain balance.