Macquarie Group has warned that potential cuts in nickel production from Indonesian mines could result in the loss of more than a third of global supply from the market.
The Indonesian Government is mulling over major cuts to nickel mine quotas, with output potentially dropping from 272mt in 2024 to just 150mt this year, according to a report by Bloomberg.
This would constitute a 40% drop from Macquarie’s base case, causing a sharp reduction in the supply of this crucial battery metal.
The bank’s analysis indicates that such reductions present a significant upside risk to prices, emphasising the importance of Indonesian nickel production in the global market.
While the bank views such significant cuts as unlikely, it acknowledges that lower-than-expected mine output poses another upside risk for prices.
In a note released on Wednesday, Macquarie stated that it still expects a small oversupply in the market this year.
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By GlobalData
Nickel prices suffered their second consecutive annual loss in 2024, influenced by increased output from Indonesia and a downturn in demand from both battery manufacturers and the stainless steel industry.
Traders are closely monitoring China’s economic stimulus efforts and the potential impact of the incoming US administration’s tariff policy on the market.
According to Macquarie, Indonesian mine output remains a crucial factor influencing nickel prices, the report said.
The country, which accounts for more than half of global nickel production, struggled to meet demand last year due to government restrictions, resulting in record imports from the Philippines.
In a related development, Chinese battery metal producer GEM has signed a project investment cooperation framework agreement with PT Vale Indonesia, the Indonesian unit of Brazilian mining company Vale.
This agreement aims to establish a high-pressure acid leach facility in central Sulawesi, Indonesia.
The $1.4bn nickel processing facility is designed to produce at least 60,000 tonnes per annum of contained nickel in mixed hydroxide precipitate, a key component for electric vehicle batteries.
