Benchmark nickel prices took a tumble this week on news that top producer Indonesia is preparing to significantly raise its annual mining quotas to 360 million metric tons.
The country’s Ministry of Energy and Mineral Resources reportedly notified several mining companies that mid-year revisions will raise the total volume of mining quotas, known as RKABs, from the 260 million metric tons authorized during the first half of the year, people familiar with the matter told Bloomberg.
Despite the headlines, however, Indonesia’s mining ministry has explicitly denied the reports.
“The Ministry of Energy and Mineral Resources has never made such a statement,” Tri Winarno, director general of mineral and coal, told Bloomberg Technoz on Wednesday (June 24).
While dismissing the 360 million metric ton figure, the ministry said it has not yet finalized the full-year 2026 quotas.
Indonesia, which commands roughly 60 percent of global nickel production, has attracted tens of billions of dollars in investment from Chinese smelting firms since implementing a raw ore export ban in 2020.
Whether the quota is ultimately raised to 360 million metric tons or a lower figure, domestic refiners have struggled to secure raw ore under the strict output caps introduced at the beginning of the year.
PT Weda Bay Nickel, previously the world’s largest nickel ore producer, halted production last month after exhausting its reduced allocation. Other major producers, including PT Vale Indonesia, part of major miner Vale (NYSE:VALE), require immediate quota increases to supply new processing facilities scheduled to begin operations.
The supply relief is a pivot from the state-managed discipline Jakarta enforced in April, when the government implemented a higher benchmark pricing formula for raw ore to bolster state revenues amid rising oil prices. That formula added the cost of by-product metals, including cobalt, to the minimum legal price floor smelters must pay miners.
The resulting double squeeze punished high-pressure acid leach plants producing battery-grade material.
Those capital-intensive facilities were already exposed to surging costs for sulfur, a critical processing reagent, as the conflict involving Iran restricted supplies from the Persian Gulf.
Prior to the proposed quota increases, the domestic ore shortage had pushed local premiums for high-grade saprolite ore up to 60 percent above the government floor price.
Despite Indonesia’s regulatory changes, the global nickel market continues to face a supply overhang.
While warehouse inventories on the Shanghai Futures Exchange declined earlier this year, London Metal Exchange (LME) inventories had climbed from 255,282 metric tons in December to 282,792 metric tons by late March.
The oversupply has limited the efficacy of western lobbying efforts to establish a “green premium” for lower-carbon nickel produced outside Indonesia’s coal-reliant smelting network.
Benchmark nickel futures fell as much as 2.7 percent on the LME following reports of the quota relaxation.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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