Indonesia forced companies to process nickel ore — it worked
Nickel prices jumped over $18,000/t in January 2026:
- nickel price rally: nickel prices jumped to $16,500–$18,500per ton range in early January 2026 – hitting their highest levels in over two years
- Indonesia reins in output – begins pivot from maximizing supply to maximizing value: Indonesia, which now produces two-thirds of the world’s nickel, is delaying mining permits and slashing nickel output quotas to support prices
- only about 55% of Indonesia’s approved nickel ore production capacity was actually utilized in 2025 – meaning much of the supposed surplus was a statistical illusion
Indonesia’s new nickel supply strategy
Indonesia, the world’s dominant producer with two-thirds of nickel supply, has
signaled major supply cuts for 2026, triggering a rally in nickel prices, including:
- revising the annual mining quota revision process from 3 years to one year to manage supply and pricing
- banning new NPI smelters and HPAL processing plants to limit new nickel production and focus future investment on adding value downstream from existing production
- tighter environmental and forestry enforcement with significant fines levied
PT Vale Indonesia has temporarily halted mining operations in early January after failing to secure its 2026 mining quota approval, underscoring the government’s stricter enforcement of annual work plans rather than multi-year permits. The halt has limited direct production impact but serves as a highly visible indicator that regulators are tightening control of output across the sector.
The latest policy moves are being interpreted by markets as a structural shift from a previously oversupplied market regime towards active supply management and price support. Nickel prices soared by more than $4,000 per tonne ($2/lb) in 4 weeks over US$18,000 per tonne — the highest levels in over two years.
Over the last decade, Indonesia’s policy has been one of massive expansion across nickel mining and processing to dominate global market share:
- incentivising both upstream and downstream investment — from mine to refined product
- flooding the market and reducing prices to take out global competitors
In 2020, the government in Indonesia banned raw nickel ore exports but allowed the export of refined nickel products to boost investment in processing plants — by forcing companies to process and manufacture in the country — and the plan worked. By July 2023, there were 43 nickel smelting facilities in operation in the country, 28 under construction, and 24 more being planned in the country.
Indonesia increased its market share from 31.5% in 2020, to 60% in 2024, and forecast to reach more than 75% by 2030.
“The Great Nickel Trade War” resulted in closure of nickel mines across the West, in particular, at least 8 closures in Australia and New Caledonia in 2024 — driving Indonesia’s share of global nickel production even higher.
Now, the scramble for market share has given way to supply discipline, with Indonesia moving to defend prices and consolidate its monopoly power as a one country “ONEC” where it now controls more of the nickel market than OPEC did at its peak in the early 1970s.
