Global Supply Chains at Risk as Indonesia Slashes 2026 Nickel Quotas by a Third

2026-04-16 global

Jakarta, Thursday, 16 April 2026.
Controlling 60% of the global market, Indonesia’s drastic 30% cut in 2026 nickel production creates a massive supply gap, threatening both electric vehicle and defense manufacturing worldwide.

The Quota Squeeze and Supply Chain Shockwaves

Indonesia’s dominance over the global nickel supply has grown at an unprecedented rate, with its market share surging from 31.5 percent in 2020 to 60.2 percent by 2024 [1]. However, the landscape is now shifting dramatically. For 2026, the Indonesian government capped domestic mining quotas at 260 million to 270 million wet metric tonnes, representing a sharp decline from the 379 million tonnes approved in 2025 [1][2]. This reduction creates a severe bottleneck, as local smelters alone require between 320 million and 330 million tonnes to operate efficiently [5]. Consequently, the industry is bracing for a potential shortfall of 80 million to 100 million tonnes between the approved ore supply and actual smelter demand [1].

Geopolitical Pressures and the Sulfur Squeeze

Compounding the domestic quota restrictions is an escalating crisis in raw material procurement. The ongoing war in Iran has disrupted global supply chains, severely impacting Indonesian extraction plants that rely heavily on imported sulfur for high-pressure acid leaching (HPAL) operations [2][4]. In 2025, 75 percent of Indonesia’s imported sulfur originated from the Middle East [5]. With supply lines compromised, sulfur prices in Indonesia have surged by 34 percent to $700 per tonne [5], while some market benchmarks report prices spiking above $800 per tonne [4]. This acute shortage has forced several Indonesian nickel processors to curb their output of intermediate products by at least 10 percent since March 2026 [2][4].

Overhauling the Benchmark Pricing System

Beyond strict volume caps, Jakarta is fundamentally restructuring the economics of its nickel industry. Driven by a directive from President Prabowo Subianto to optimize state revenues and ensure fairness in the mineral sector, the ESDM officially issued Ministerial Decree No. 144.K/MB.01/MEM.B/2026 [3][8]. This sweeping regulation, which took effect on Wednesday, April 15, 2026, overhauls the calculation formula for the Nickel Ore Benchmark Price (HPM) [3][8]. The new pricing framework upgrades the valuation to a multi-element comprehensive model, incorporating associated minerals such as cobalt, iron, and chromium into the baseline cost [3][8]. Furthermore, the correction factor for 1.6 percent grade nickel ore was increased from 17 percent to 30 percent [3].

Market Reactions and Long-Term Outlook

The culmination of strict quotas, sulfur shortages, and revised pricing formulas has predictably jolted global commodities markets. After facing severe downward pressure from oversupply since 2023 [5], nickel prices have rebounded sharply. Prices for Benchmark’s EXW China nickel sulphate grade rose by 18.6 percent throughout the first quarter of 2026 [6]. By mid-April, three-month nickel futures on the London Metal Exchange (LME) climbed to $18,250 per ton, marking an over two-month high [2][4]. Citing this structurally firmer price environment, research firm BMI recently raised its 2026 nickel price forecast from $15,800 to $16,600 per tonne [2].

Sources

Supply chain Nickel supply