Continued weak nickel prices prompts rebound catalyst? Indonesia suspends nickel mining near "diving paradise"

The world's largest nickel mining supplier, Indonesia, will temporarily suspend nickel mining activities near a dive site known as a "diving paradise" in the eastern part of the country, primarily out of concern for its impact on Indonesia's tourism industry. For the nickel price, which has experienced a strong rally in March and a big rebound in April, this might bring a new catalyst for price increasessince May, the nickel price has been weak compared to the peak in 2022-2023. Indonesian Minister of Energy and Mineral Resources, Bahlil Lahadalia, told reporters on Thursday that the nickel mine operated by the Indonesian state-owned company PT Aneka Tambang's subsidiary PT Gag Nickel in the West Papua Raja Ampat Islands will temporarily cease production, and a government working group will investigate its impact on the local economy. It is understood that the area is a marine protected area, famous worldwide for its coral reefs and biodiversity, popular with diving enthusiasts. "We understand that Raja Ampat is a tourist spot that must be protected, and its area is very vast," Lahadalia said at the press conference. Aneka Tambang did not immediately respond to requests for comment. The mine is located on Gag Island in Indonesia and produces one of the highest-grade nickel ores in Indonesia, with an annual overall mining quota of 3 million tons. Indonesia has rapidly expanded its nickel mining industry in the past decade to meet the future growth demand for nickel metal in electric vehicle batteries. Currently, the country accounts for more than half of global nickel production, benefiting from its large ore reserves and extremely large smelting industry. Under the catalyst of oversupply, the three major electric vehicle battery metals of lithium, nickel, and cobalt have continued to plummet since 2023. Extreme strict measures on supply capacity will be a core factor determining the overall reversal of battery metal prices in 2025. In 2023, the trading prices of lithium, nickel, and cobalt collapsed across the board, followed by continued plunges in 2024. The "electricization dream" of the "Three Major Battery Metals" focusing on electric vehicles apparently turned into an inescapable "nightmare." Due to low-price erosion of cost curves, Indonesian government authorities have already shown positive signs of supply discipline by limiting mining quotas and suspending the approval of new mining processing plants, and the market expects the production cuts this year to be upgraded. According to the metal trading prices of the LME (London Metal Exchange), the price of nickel metal has plummeted by more than 50% since early 2023, which can be described as halved. This year, the nickel price has rebounded slightly under the market's expectation of production cuts by Indonesian mining companies, currently hovering around $16,500 per ton, but for comparison, the nickel price at the end of 2022 was hovering around $29,880 per ton. In addition, the rapid expansion of the nickel mining industry has raised concerns about deforestation, water pollution, and ecosystem destruction. Due to Indonesia's large-scale use of coal-fired power, the carbon emissions from smelting this metal are also high. This week, Greenpeace protested against large-scale mining activities in the Raja Ampat area at a metal conference in Jakarta, the capital of Indonesia. The event was widely covered in local media and social media, prompting the government to respond. Indonesia remains the world's largest nickel mining supplier. According to data from the U.S. Geological Survey (USGS), in 2022, Indonesia's nickel reserves accounted for approximately 20.6% of the global total reserve, ranking first in the world. In terms of production, Indonesia produced 1.6 million tons of nickel in 2022, accounting for 48.8% of the global total production. If the nickel ore output of the world's largest nickel mining producer and exporter continues to fall below market expectations, it may bring a long-awaited significant upward trend in nickel metal prices.