Reliable nickel ore supply crucial for downstreaming: INDEF
“The government’s move to relax nickel production quotas is considered an important correction to maintain the sustainability of the national downstream program,” INDEF’s Head of the Center of Industry, Trade, and Investment, Andry Satrio Nugroho, remarked on Monday.
He explained that the Directorate General of Minerals and Coal informed that quota adjustments will only be granted to companies that implement good corporate governance (GCG) principles, good mining practices (GMP), and comply with all applicable regulations and policies.
He believes the quota relaxation is a consequence of the imbalance between efforts to maintain nickel prices and the need for raw material supplies for the downstream industry.
“I understand the policy direction. This is more accurately interpreted as a correction to the previously excessively tight quota,” he said.
Nugroho conveyed that the challenge lies in the fact that production quotas are being restricted to support prices, while smelters simultaneously require a greater supply of ore to maintain operations.
“These two goals are difficult to achieve simultaneously through quota arrangements alone,” he continued.
He explained that the need for nickel ore to supply smelters in 2026 is estimated to reach 340 million to 360 million tons.
Meanwhile, the government has set the 2026 nickel production Work Plan and Budget (RKAB) at around 260 million to 270 million tons, lower than the 2025 RKAB, which reached 379 million tons.
According to him, this additional volume needs an increase to cover the raw material supply deficit facing the processing industry.
“I think it’s not enough and not fast enough. We estimate the smelter raw material shortage this year to be in the range of 60 to 100 million tons, depending on the assumed utilization rate,” he pointed out.
He said that if the quota relaxation only allowed for a slight increase within the existing quota range, the additional supply would remain far below the raw material shortfall and would be insufficient to prevent layoffs caused by the shortage.
Nugroho also said the limited supply of nickel ore has begun to affect the processing industry’s performance, with smelter utilization rates expected to decline to around 70–75 percent this year from nearly 90 percent last year.
He noted that addressing the supply issue requires more than increasing production quotas. The government also needs to ensure that smelter development is aligned with raw material availability to avoid recurring supply shortages.
For him, the shortage would persist unless permits for new smelters and nickel ore production quotas were planned and determined under a coordinated framework.
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Translator: Mario Sofia, Resinta Sulistiyandari