Indonesian Starts to Review Licenses for Manufacturing Nickel

Comprehensive foreign media news, on June 17, 2024, the Indonesian government announced a comprehensive assessment of licenses for rotary kiln electric furnace smelters producing ferronickel and nickel pig iron. Ferronickel and nickel pig iron are key components in the production of stainless steel.

In recent years, Indonesia has emerged as a major nickel producer, with production growing from approximately 800,000 tons in 2020 to 2 million tons in 2023. The country's nickel pig iron production accounted for more than 90% of its nickel output in 2023, and about 35% of global nickel supply.

However, the initiative to review licenses is intended to stockpile rapidly depleting ore for higher-value nickel products. There is no indication yet of how this initiative will affect existing licenses.

According to Morgan Stanley, Indonesia's nickel pig iron production is expected to grow by nearly 30% by 2030. These estimates may be subject to downside risk depending on the status of future production licenses and whether current licenses will be subject to any restrictions.

Nickel pig iron is trading 33% below LME prices, while products such as nickel sulfate are trading at almost the same price. Analysts said the situation highlights the supply risk inherent in a commodity that is so geographically concentrated in one country. They added that this could help to reduce the discount of the Indonesian nickel price to the LME price, and could also slow the growth of Indonesian nickel production in the short term, especially if currently operating plants are also affected.