Indonesian control may lead to a sharp 35% drop in nickel supply. The market expects the continuously falling nickel price to rebound.

According to the latest analysis data from the international top investment institution Macquarie Group Ltd., the potential reduction in nickel mine production in Indonesia may reduce the global market supply scale by more than one-third (Macquarie estimates the scale of nickel mine supply reduction to be approximately 35%), thus bringing extremely significant upward stimulus to the nickel metal price that has been sluggish since 2023. Under the catalysis of large-scale oversupply, the prices of the three battery metals lithium, nickel, and cobalt have been plummeting since 2023. Extreme and strict measures to limit production capacity on the supply side will be the core factor determining the comprehensive turnaround of battery metal prices in 2025. According to reports from multiple media last month, senior officials in the Indonesian government are considering a significant reduction in nickel ore quotas, from 272 million tons in 2024 to approximately 150 million tons this year. This will be about 40% lower than Macquarie's basic forecast, ultimately leading to a significant decrease in the production of this battery metal, thereby boosting the nickel metal prices that have plummeted significantly since 2023 due to oversupply. According to the metal trading prices on the LME (London Metal Exchange), the price of nickel metal has plummeted by over 85% since early 2023, halving. It is currently hovering around $15,455 per ton, while for comparison, the price of nickel at the end of 2022 was hovering around $29,880 per ton. Indonesia is still the largest supplier of nickel ore in the world. According to data from the US Geological Survey (USGS), in 2022, Indonesia's nickel ore reserves accounted for approximately 20.6% of the global total reserves, ranking first in the world. In terms of production, Indonesia's nickel production reached 1.6 million tons in 2022, accounting for 48.8% of the global total production. Macquarie's analysts believe that the possibility of such a massive production cut is extremely low, but they point out that the nickel ore output of the world's largest nickel ore-producing and exporting country has been consistently lower than market expectations, bringing long-awaited significant upward risks to nickel metal prices. The investment institution expressed in a research report on Wednesday that although Indonesia may reduce nickel mine production, the institution still believes that the market supply will be slightly oversupplied this year. Due to the surge in nickel mine production in Indonesia in recent years and the significant weakening of demand from battery manufacturers and stainless steel industries worldwide, nickel metal prices have experienced a continuous decline for two consecutive years, plummeting since 2023. This year, traders in the commodity sector are focusing on China's economic stimulus policies and the impact of the upcoming tariff policies imposed by the Trump-led US government, both of which will have a significant impact on nickel demand and, consequently, on the trading price of LME nickel metal. According to Macquarie's statistical data, in addition to these two macro factors, the scale of nickel mine production in Indonesia will also be a key influencing factor on the trading price of nickel metal. As nickel prices continue to languish, the Indonesian government began implementing some moderate restrictions in 2024. The nearly half of the global nickel mine production in Indonesia was unable to meet all demands last year, leading some upstream metal companies to start importing record amounts of nickel from the Philippines. However, nickel prices continue to languish due to a significant oversupply on the supply side. In 2023, the trading prices of lithium, nickel, and cobalt all collapsed, followed by continued plunges in 2024. The "electricization dream" of the "three major battery metals" focused on electric vehicles has clearly turned into an inescapable "nightmare." Due to cost erosion at low prices, sectors that once competed to build new metal supply expansion businesses have been closing mines and continuously postponing new project progress. If Donald Trump, who is set to return to the White House in January next year, fulfills his threat to electric vehicles by abolishing the Biden administration's electric vehicle policy, then electric vehicle subsidies in the US could be completely eliminated next year. At that time, the growth rate of electric vehicle sales in North America may further decline or even turn negative, which could lead to further declines in the long-term sluggish prices of lithium, nickel, and cobalt. However, at least the Indonesian government authorities have shown positive signs of supply discipline by limiting mining quotas and suspending approval of new mining processing plants.