Indonesia’s nickel mining quotas fall short of demand

Indonesia's ministry of energy and mineral resources has approved 204 nickel mining work plans for exploration and production, according to market participants, with a combined quota of 220.7mn t.

The approved quotas, also known as RKAB work plans, allocated to the production segment is unknown. But participants said that the quotas may not be enough to meet expected demand this year because more than 90pc of the production RKABs are expected to have been approved. Nickel ore demand is forecast to reach 220mn t in 2024 based on projected nickel output, according to data compiled by Argus. Indonesia's nickel ore output was 175.6mn t in 2023.

A large portion of the approvals was granted to the Morowali region, participants said, while the approval rates for RKABs in other regions, such as Sulawesi and Weda Bay, were significantly lower. This could potentially lead to a regional shortage of nickel ore.

Nickel consumption is trending higher with an influx of overseas investment into Indonesia. Indian steel producer Jindal Stainless is planning a 1.2mn t/yr stainless steel melt shop, while Chinese battery metals and materials manufacturer Green Eco-Manufacture is building a 30,000 t/yr battery cathode precursor plant.

But nickel intermediate supplies have been tight, dampened by tighter spot availability and lower term-contracted availability from Indonesia-based plants with a bearish nickel-cobalt-manganese battery precursor market.

Civil unrest in New Caledonia has sparked concerns of a further tightening of supplies, pushing London Metal Exchange nickel prices on 20 May to their highest level in nine months at $21,625/t. Several businesses in the French-controlled territory's nickel value chain were disrupted during the riots, affecting production and transportation.

Nickel prices will likely remain volatile in the coming months, depending on the approval rates of new RKABs, availability from swing suppliers such as New Caledonia and the growth rate of Chinese stainless steel and electric vehicle demand.

By Sheih Li Wong