Chinese nickel investors brace for headwinds as Indonesia weighs smelter freeze
Chinese investors could face significant disruption if Indonesia imposes a moratorium on new nickel smelters to curb global overproduction and protect local industries across its vast minerals sector, analysts said. Indonesia was weighing a halt to the construction of smelters that produce semi-finished nickel products amid a global supply glut that had driven down commodity prices, state news…
China's nickel investors are bracing for potential disruptions as Indonesia contemplates imposing a moratorium on new nickel smelters to address global overproduction and safeguard local industries, according to analysts. The Indonesian government is considering restrictions on smelters that produce semi-finished nickel products, such as nickel pig iron and nickel matte, which constitute about 50 to 60 percent of the country's total output, according to state news agency Antara.
The proposed moratorium is part of the energy minister's strategy to bolster Indonesia's industrial structure. Chinese investment, which accounts for roughly 75 percent of Indonesia's nickel refining industry, stands to be significantly impacted by such a regulatory shift. Nukila Evanty, a member of the Asia Centre research institute's advisory board, emphasized that Chinese companies and capital play a major role in Indonesia's nickel mining and smelting sectors.
He advised Chinese investors to consider scaling back new smelting capacity, especially projects producing intermediate nickel products in an already oversupplied market. Indonesia's dominance in the global nickel market, holding over half in 2023, is attributed to strong demand for products like electric vehicle batteries and substantial investment in smelting facilities.
However, this expansion has contributed to an oversupply since 2023, negatively affecting prices. If a moratorium is implemented, Chinese-invested companies planning conventional smelting capacity expansions could face delays or cancellations, particularly where profit margins are already thin. Indonesia's regulatory uncertainty poses a greater concern, as any frequent changes in investment conditions could lead investors to postpone or withdraw from the country.
Zhao Xijun, a finance professor at Renmin University in China, suggested that if Indonesia struggles to develop its own nickel smelters under a moratorium, Chinese enterprises would likely invest in other countries, leaving Indonesian mines undeveloped. Evanty from the Asia Centre advisory board recommended that Chinese investors focus on enhancing existing facilities, diversifying into higher-value products, and adhering to stronger environmental standards.
Written by urgent.news from South China Morning Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
