Indonesia Nickel Production Faces Major Cuts Amid Chinese Strategy Shift

As Chinese operators consider steep output cuts, Australia-listed Nickel Industries says nickel producers at Indonesia Morowali Industrial Park (IMIP), a key production hub for the metal, will coordinate reductions. On an earnings call, Managing Director Justin Werner told analysts that all operations within IMIP would make coordinated cuts, but he did not specify a percentage. He added that non-integrated producers would be hit hardest.

At the Huayue nickel and cobalt project at IMIP on Sulawesi, Nickel Industries (ASX: NIC) holds a 10% stake alongside China’s Huayou Cobalt (SHA: 603799), while nickel giant Tsingshan Group is among its major shareholders. Following a meeting earlier this week, Chinese producers are weighing joint production cuts, according to people familiar with the matter, although the scale and duration of any reductions remain undecided.

Chinese Nickel Producers Weigh Output Cuts

Three sources said companies are considering halving production of mixed hydroxide precipitate (MHP), an intermediate used to produce chemicals for electric vehicle batteries. Two of those sources and two other people familiar with the matter said senior executives are also considering a 20% cut in nickel pig iron (NPI) output. Indonesia is expected to account for about two-thirds of global mined nickel production in 2025, according to the US Geological Survey. Coordinated cuts by Chinese operators there could tighten supplies of battery materials and stainless steel feedstock at a time when prices are falling.

Executives are reviewing this year’s output figures and speaking with project shareholders, so it is not yet known how long any cuts would last or how much production they would affect, the people said. A trading source added that it is also unclear whether the proposals would include industry-wide reductions that have been underway for months. The meeting involved Tsingshan Group, CNGR Advanced Material (SHE: 300919), Lygend Resources (HKG: 2245), Huayou Cobalt and GEM (SHE: 002340), the people said, requesting anonymity because they were not authorised to discuss the matter publicly.

Nickel prices have also been weighed down by higher production costs, sulfur shortages, tighter Indonesian nickel ore mining quotas and a broader price decline. Nickel fell nearly 25% from its peak of $20,000 a ton this year to $15,070 last week, its lowest level since December 2025. NPI prices, measured by SMM-NIC-NPI15, also fell, reaching 1,009 yuan ($151) per nickel unit on Wednesday, down from more than 1,100 yuan in early September. Werner said low rainfall linked to El Niño had caused a water shortage, prompting Nickel Industries to cut Indonesian NPI output to 75% of capacity this month and delay the full ramp-up of another nickel and cobalt project. Nickel, meanwhile, rose 3.7% on Wednesday after Bloomberg first reported plans for Tuesday’s meeting, according to London Metal Exchange data for ticker CMNI3. The companies did not immediately respond to requests for comment.