Indonesia, which has successfully partnered with China to drive down nickel prices and force rivals out of the industry, is working on a reverse plan to raise prices for stainless steel and the battery metal.
The Indonesian government proposes to cut the annual quotas issued to mining companies. Reports suggest that this reduction may result in quotas being set at 150 million tons to 200 million tons/ton, which is much lower than last year's 270 million tons/ton.
VDNI (Melon Nickel) factory located in Morosi Industrial Zone, Indonesia … [+]
If the cut is confirmed, it could invigorate the nickel market but is unlikely to encourage owners of mothballed mines in Australia, Canada and New Caledonia to restart operations.
The only likely beneficiaries of a recovery in nickel prices from a depressed $15,640 a ton may be the Chinese companies behind Indonesian mines and the Indonesian government, which reaps tax revenue from an industry that has ramped up output significantly over the past five years.
Controlling markets through massive overproduction, driving down prices for goods after competitors are wiped out, is a favored business tactic in China that was used in the Western world before being banned by government antitrust regulators.
The rare earth industry, which supplies critical metals to technology sectors with industrial and military uses, has been a favorite for Chinese market manipulation, which is why the United States is working with Australia to increase non-Chinese supplies.
Nickel is not considered an essential metal, but Indonesia appears to be following China's lead, to the benefit of the Chinese companies that control the industry in Indonesia.
Market share increased from 28% to 63% in five years
Macquarie Bank predicts Indonesia/China's dominance of the nickel sector can be seen in the Southeast Asian nation's share of the metal's global market surging from 28% five years ago to 63% last year. , the market share will reach 75%.
Using Chinese mining and metal processing technology, Indonesia is able to tap into vast reserves of low-grade, near-surface ore that is much cheaper to mine and process than deeper mines in Australia and Canada.
Indonesia's meteoric rise as the world's leading nickel producer has coincided with a price collapse in 2022 from nearly $30,000/ton (with a brief surge to $50,000/ton during a short-seller squeeze at the start of the Ukraine war) to the current $15,640/ton. tons, a decrease of US$6,000/ton from eight months ago.
Although nickel is seen as one of its preferred “future-proof” metals, production costs have fallen below even those of most competitors, forcing even BHP Billiton, the world's largest mining company, to suspend most of its nickel operations.
Electric vehicle batteries in a workshop of Nanjing Xinwangda Electric Vehicle Battery Co., Ltd. in China. … [+]
It is its use in electric vehicle (EV) batteries that has led BHP to decide to continue using nickel after coming close to exiting the industry several times over the past decade.
What ultimately prompted BHP to exit the nickel market was China's determination to develop its own supply of the metal for its world-leading electric vehicle manufacturing business.
Having cleared the roadblocks to competition, the Indonesia/China partnership is now poised to reap the profits of industry dominance.
