Indonesia's dominance of the global nickel market is now absolute. At 2.05 million tons of contained nickel production projected for 2026, Indonesia accounts for 55% of global supply — a share that has nearly doubled since 2020 when it was 30%. The ramp-up continues unabated, with new RKEF (rotary kiln electric furnace) lines starting up at a rate of roughly 15-20 lines per year across the major industrial parks.
The Indonesia Morowali Industrial Park (IMIP) in Central Sulawesi, co-developed by China's Tsingshan Holding Group, is the epicenter. IMIP hosts over 50 RKEF lines with combined capacity exceeding 1 million tons of NPI per year. The Indonesia Weda Bay Industrial Park (IWIP) in North Maluku, developed by Tsingshan and France's Eramet, has added 24 lines and is approaching 500,000 tpy capacity. A third park, the Indonesia Huafei Industrial Park (IHIP), is under construction in Southeast Sulawesi.
Chinese capital is the engine. Cumulative Chinese investment in Indonesian nickel processing has reached roughly $32 billion since 2015, according to Indonesia's Investment Ministry. The model is straightforward: Chinese companies provide capital and technology, Indonesia provides ore (laterite nickel deposits containing 1.5-1.8% nickel), and the output — NPI, nickel matte, and mixed hydroxide precipitate (MHP) — is shipped to China for stainless steel and battery production.
The Indonesian government's downstream processing mandate (prohibiting raw nickel ore exports since January 2020) forces all ore to be processed domestically. This policy has successfully attracted investment but has also created an overconcentration risk. If demand growth slows or technology shifts (e.g., LFP batteries displacing NCM in EVs), Indonesia's nickel-dependent economy and the Chinese capital invested in it face a painful adjustment.
For the LME nickel price, the math is relentless: Indonesia adds roughly 200,000-250,000 tons of new supply annually while global demand grows by 100,000-120,000 tons. The surplus accumulates in LME warehouses (276,216 tons and counting) and in Chinese bonded warehouses (estimated at 80,000-100,000 tons). Until Indonesian supply growth decelerates — which would require either a policy shift in Jakarta, a sustained price below $16,000/mt, or an environmental crackdown on coal-fired RKEF plants — nickel prices will struggle to sustain a rally.
Indonesia controls 55% of global nickel supply and is still growing. For stainless steel buyers, this means nickel surcharges should remain low through 2026 and into 2027. The structural surplus in Class 2 nickel is not going away. However, supply concentration at this level carries policy risk: Indonesia could impose export taxes on NPI (discussed since 2024 but not implemented) or tighten environmental regulations on coal-fired processing. Monitor Indonesian regulatory developments; a policy shift is the only catalyst that could reverse the nickel surplus narrative.