(Bloomberg) -- Potential cuts to Indonesian nickel mine output could remove more than a third of global supply from the market, according to Macquarie Group Ltd., presenting a significant upside risk to prices.
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The Indonesian government is weighing deep cuts to nickel mine quotas from 272 million tons in 2024 to as low as 150 million tons this year, Bloomberg reported last month. That would be 40% lower than Macquarie’s base case, leading to a drastic reduction in output of the battery metal.
The bank views cuts of that scale as highly unlikely, but notes lower-than-expected mine output in the world’s largest producer presents another upside risk for prices. It still sees the market in a small oversupply this year, it said in a note on Wednesday.
Nickel slumped to a second straight annual loss in 2024 due to booming Indonesian output and weakening demand from battery-makers and the stainless steel sector. This year, traders are eying China’s efforts to stimulate its economy, as well as the impact of the incoming US administration’s tariff policy.
Indonesian mine output remains the key swing factor for prices, according to Macquarie. Ore supply in the country that accounts for more than half of global nickel production struggled to keep up with demand last year due to government restrictions, leading to record imports from the Philippines.
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