Indonesia nickel industry faces production cuts and environmental concerns

Chinese-controlled nickel smelters in Indonesia are considering coordinated production cuts to combat declining profitability caused by weak market prices. Executives from major firms, including Tsingshan Holding, Gem, Lygend Resources & Technology, and Zhejiang Huayou Cobalt, have met to discuss reducing operating rates at high-pressure acid leaching (HPAL) plants. One proposal involves a 30 per cent reduction in the output of mixed hydroxide precipitate (MHP), a key material for batteries.

While no formal agreement has been reached due to execution challenges, the sector faces multiple pressures. These include rising nickel ore prices set by the Indonesian government, increased costs for sulphur due to Middle East conflicts, and shifting mining quotas.

Simultaneously, Indonesia’s rapid expansion as the world’s largest nickel producer is creating environmental tensions. A study published in Nature Ecology & Evolution suggests that meeting surging global demand for electric vehicle batteries could jeopardize critical ecosystems. Researchers warn that a significant portion of projected nickel demand could be met by mines located in areas vital for biodiversity and carbon conservation, complicating Indonesia’s national goals to protect 30 per cent of its territory by 2030.