An Indonesian senior official indicated on Thursday that despite the price decline associated with increased nickel processing costs, miners and smelters in Indonesia are still experiencing favorable margins. The shifting nickel price landscape is expected to further benefit the country’s battery industry, aligning with Indonesia’s strategic focus on downstream industry development.
As the possessor of the world’s largest nickel ore reserves, Indonesia enforced a ban on nickel ore exports starting in 2020 to incentivize investments in its processing sector. This policy spurred significant investments by smelting companies, predominantly from China, leading to a surplus of processed nickel globally. The oversupply has contributed to a notable price correction over the past year, particularly impacting Australian producers.
Despite the price correction, three-month nickel on the London Metal Exchange traded around $17,650 per metric ton on Thursday, with current prices deemed favorable by the official, exceeding historical averages.
Septian Hario Seto, a deputy coordinating minister overseeing mining, emphasized the government’s commitment to nurturing the downstream industry, where nickel ore is refined into higher-value products. He highlighted that maintaining nickel prices around $18,000 per metric ton in the long term would be beneficial for Indonesia, ensuring competitive pricing for batteries and electric vehicles (EVs).
Seto underscored that while profitability for miners and smelters may not match the levels seen two years ago, the current margins remain satisfactory. The predominant investment in nickel processing in Indonesia revolves around nickel pig iron (NPI), essential for stainless steel production. However, the government is keen on fostering local production of batteries and EVs to diversify the industry landscape.
The official cautioned that excessively high nickel prices could impede EV adoption or prompt car manufacturers to seek alternative battery materials. Indonesia’s strategic approach differs from Australia’s focus, with a clear emphasis on developing a comprehensive industry ecosystem spanning from upstream to downstream segments.
The recent price adjustments have prompted mine closures, production reductions, and asset devaluations in Australia. Seto reiterated the government’s stance on discontinuing tax incentives for NPI production investments, redirecting new investments towards battery material production to bolster Indonesia’s position in the evolving global market.