Indonesia’s move to cut its nickel mine output could strip more than a third of global supply from the market, said Macquarie Group Ltd., showing the risk of an enormous price hike.
The Indonesian government is considering substantial cuts in quotas for nickel mines from 272 million tons in the previous year to as low as 150 million in 2025. The new quota is a drastic 40% lower from Macquarie’s base case for the battery material.
Although the bank remarked that a cut of such scale is improbable, any lower-than-expected reduction in output from the world’s largest producer would still affect the prices. In the same note released on Wednesday, the bank said that 2025 would still see a slight oversupply in the market.
The price of nickel has fallen off for the second straight year in 2024, largely due to a surging Indonesian output and declining demand from battery and steel manufacturers.
According to Macquarie, Indonesian nickel remains a decisive factor for prices. Last year, Indonesia struggled to keep up with nickel demand as a result of government restrictions, leading to the country’s unprecedented imports from the Philippines.
