Indonesia to Maintain Global Nickel Supply, Keeping Prices Stable

March 1, 2024

Indonesia, the leading nickel exporter globally, asserts that nickel prices are unlikely to see a significant increase, promising to keep the market well-supplied. This strategy aims to support electric vehicle (EV) manufacturers by maintaining lower costs. Septian Hario Seto, a key Indonesian government official, indicated that prices might not rise much above $18,000 a ton on the London Metal Exchange. The nation's approach is designed to ensure a steady supply for the burgeoning demand from the EV sector.

In 2022, nickel prices experienced a steep decline of about 45%, with a momentary dip below $16,000 a ton, due to weakening demand and a surge in supply from Indonesia, which accounts for over half of the global output. The current price dynamics have rendered nearly half of the world's nickel operations unprofitable, prompting considerations of permanent closures in countries like Australia and New Caledonia.

Seto suggested that prices should remain above $15,000 a ton, as production cuts might be triggered below this threshold. Nickel's role in the EV industry is pivotal, and Indonesia, with the help of Chinese investments, is doubling down on producing mixed hydroxide precipitate (MHP), a key component for EV batteries. The country anticipates a doubling of MHP production capacity within three years, catering to the EV sector's needs.

Indonesia's strategy revolves around balancing the ecosystem for all stakeholders involved in the nickel supply chain, aiming for sustainable profitability without causing price spikes that could push buyers towards alternative materials. The nation is also proactive in securing off-take deals for its MHP output, predominantly produced in Chinese-owned facilities, addressing concerns over carbon footprints associated with nickel production.

The move comes as European automakers actively seek Indonesian nickel to secure their supply chains, while US manufacturers grapple with the dominance of Chinese entities in the global battery market. Indonesia is negotiating a critical minerals deal with the US to ensure its nickel is integral to American EV manufacturing, amidst competition from both China and Europe.

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