Potential Indonesian Nickel Output Cuts Pose Upside Risk for Global Prices

Significant cuts to Indonesia’s nickel mine production could remove over a third of global supply, creating substantial upside pressure on nickel prices, according to Macquarie Group Ltd. Reports suggest the Indonesian government is considering slashing nickel mine quotas from 272 million tons in 2024 to as low as 150 million tons this year. Such a move would represent a 40% reduction from Macquarie's base case projection.

While Macquarie deems cuts of this magnitude unlikely, it acknowledges that lower-than-expected production in Indonesia—the world’s largest nickel producer—could pose a considerable risk to market stability. Despite this, the bank still anticipates a minor market oversupply for 2025.

Nickel prices have faced two consecutive years of losses, primarily driven by Indonesia's surging production and weakened demand from battery manufacturers and the stainless steel industry. This year, market participants are closely monitoring China’s economic stimulus measures and potential shifts in U.S. trade policy under the incoming administration.

Indonesia’s nickel output remains a critical influence on global prices. Government restrictions have strained ore supply, forcing the country to import record amounts from the Philippines to meet processing demand. Any substantial production cuts could exacerbate supply challenges and push nickel prices higher.