Indonesia tightens nickel ore supply, GEM and Huayou Cobalt respond: We were already prepared

Under the tightening policies on nickel supply in Indonesia, on February 11, French mining giant Eramet announced that its joint venture—PT Weda Bay Nickel (Weda Bay Nickel), the world’s largest nickel mine—has received an initial notice from Indonesian authorities to begin submitting an annual work plan and budget (RKAB) for a production and sales volume of 12 million tons.

Image source: Eramet official website

The company’s approved initial RKAB for 2025 is 32 million tons, which was later adjusted upward to 42 million tons in July 2025.

Based on this, PT WBN’s mining quota for this year has been reduced by over 71%.

Indonesia is the world’s largest nickel producer. RKAB is an annual work plan and budget that Indonesian mining companies must submit to and get approval from the government, used to specify annual production quotas and operational arrangements.

Weda Bay Nickel is jointly owned by Tsingshan Holding Group, Eramet, and Indonesia’s state-owned PT Aneka Tambang. Eramet stated that, consistent with the approach in 2025 and within the scope of relevant procedures in Indonesia, Weda Bay Nickel plans to apply for an early increase in its production quota.

As an industrial metal, nickel is widely used in steel, machinery, construction, and other industries. Refined nickel can be used to produce stainless steel, alloys, electroplating, and also for manufacturing nickel sulfate for batteries.

In 2025, the global nickel market faced deep pressure amid macroeconomic challenges and structural oversupply, with overall nickel prices oscillating downward both domestically and internationally. The main Shanghai nickel contract once fell below 112,000 yuan per ton, hitting a five-year low.

Meanwhile, Indonesia’s government nickel industry policies are becoming increasingly restrictive.

Public information shows that officials from Indonesia’s Ministry of Energy and Mineral Resources recently stated publicly that the country’s nickel ore production quota for 2026 is expected to be between 260 million and 270 million tons.

This production quota has been slightly adjusted from the 250-260 million tons confirmed by officials from Indonesia’s Ministry of Energy and Mineral Resources last month, but the range of 250-270 million tons has been basically set.

This quota range is about 30% lower than the 379 million tons in 2025.

Jiang Xingyu, nickel analyst at Shanghai Steel Union New Energy Business Department, told JiJie News that Indonesia’s policy orientation aims to “raise resource value” by tightening nickel ore supply and boosting nickel prices, thereby extracting greater benefits from resource endowments.

Additionally, in recent years, low nickel prices have led many Indonesian future investments to withdraw. Indonesia hopes to increase nickel prices through restrictions on nickel ore, thereby attracting more investors.

“Restrictions on quotas have been a usual method for Indonesia to raise nickel prices. But this year, the restrictions are more stringent than in previous years, reflecting a gradual tightening of Indonesia’s control over nickel resources,” Jiang Xingyu said.

According to Mysteel estimates, Indonesia’s total nickel ore demand in 2026 is about 320-330 million tons, which is 60-80 million tons less than the currently announced quota. Even considering 2025 carryover inventories and imports from the Philippines, there remains a shortfall of 30-40 million tons.

“This means that if Indonesia’s Ministry of Energy and Mineral Resources cannot supplement the nickel ore volume in the future, the nickel ore market will shift from ‘relatively loose’ in 2025 to ‘systematic shortage’,” Mysteel stated.

However, Jiang Xingyu pointed out that Indonesia typically releases some supplementary quotas mid-year. “This will depend on the actual supply and demand situation of nickel ore. We believe there is still a possibility of additional quotas in the middle of the year, but the scale will need to be closely monitored to see Indonesia’s attitude toward controlling nickel resources.”

In response to Indonesia’s supply-side shocks, domestic companies have already taken action.

On February 11, GEM Co., Ltd. (002340.SZ) announced the termination of its capital increase and share expansion plan for its wholly owned Indonesian subsidiary QINGMEI. QINGMEI has established an annual capacity of 50,000 tons of high-nickel ternary precursor materials for power batteries in Indonesia.

According to the original plan, to address global challenges, better access to the global market, accelerate product entry into Europe and the United States, reduce capital expenditure, and optimize capital structure, GEM planned to introduce overseas strategic investors to participate in QINGMEI’s capital increase and share expansion to support its business development and enhance its global competitiveness.

GEM stated that the cancellation of this capital increase and share expansion was mainly due to changes in the current internal and external environment and a cautious assessment of the risks associated with the transaction’s passive financial support.

On February 12, GEM also responded on investor interaction platforms regarding the significant reduction in Weda Bay Nickel’s capacity. The company said its Indonesian nickel resource project is located in the Morowali Industrial Park, with main nickel suppliers being Merdeka and Hengjaya, with long-term supply agreements in place to fully ensure the production needs of its Indonesian nickel resource project.

Another leading domestic nickel company, Huayou Cobalt (603799.SH), responded last month to Indonesia’s restrictions on nickel quotas. The company stated that its Indonesian subsidiary’s nickel ore supply mainly relies on equity participation in mines and long-term supply agreements, supplemented by market-based procurement.

Additionally, Huayou Cobalt’s joint project with Vale Indonesia and Ford, the Pomalaa hydrometallurgical project with an annual capacity of 120,000 tons of nickel metal, is expected to be completed and put into operation by the end of 2026.

Under the influence of supply shortage expectations, recent nickel prices have not maintained a continuous upward trend.

As of the close on February 13, the main Shanghai nickel contract fell 3.66%, closing at 135,200 yuan per ton.

Jiang Xingyu said that with the approaching Chinese New Year holiday, some funds are taking profits, combined with the decline in macro U.S. stocks and precious metals, and since the fundamentals have not shown obvious signs of shortage, nickel prices have pulled back.

He also pointed out that since nickel ore prices have gradually risen, the marginal bottom of nickel prices has moved upward. In the long term, due to a slight supply-demand gap, nickel prices are expected to fluctuate with an overall upward shift in the annual center of gravity. The focus remains on the replenishment of the Indonesian market by the Philippines and the recovery of demand.

(Article source: JiJie News)