Indonesia’s Ministry of Energy and Mineral Resources has approved roughly 220 million wet metric tonnes of nickel ore production under the RKAB quota system for 2026, approximately 10% below the 245 million wmt approved for 2025. The slowdown in approvals is most pronounced for new mining areas, while existing operations have largely received renewals. Several smelters have reported tighter ore availability in Sulawesi and North Maluku.
The Indonesian government has signaled its intention to manage nickel ore depletion more carefully. Indonesia’s high-grade saprolite ore reserves (above 1.7% nickel) are being depleted at an estimated 8% annually. At current extraction rates, reserves of high-grade ore suitable for NPI production could be exhausted within 8-10 years. The tighter quota policy is an early attempt to slow depletion and extend the life of the resource.
The immediate market impact is a modest increase in Indonesian nickel ore prices. Ore with 1.8% nickel content is now trading at roughly $42 per wet metric tonne (FOB), up $3 from May. This translates to approximately $500 per tonne higher NPI production costs, lifting the cash cost floor for Chinese NPI producers using Indonesian ore to roughly $15,000-16,000 per tonne of contained nickel.
If RKAB quotas remain tight through H2, the nickel surplus could narrow faster than expected. Indonesian smelters that rely on purchased ore rather than captive mining operations are most exposed. The risk of ore supply disruptions — either from quota constraints or from the rainy season in Q4 — adds an upside tail risk to nickel prices that the current surplus narrative does not fully price in.
The tightening of Indonesian ore quotas is the first supply-side constraint in a market that has been defined by surplus. If RKAB approvals remain 10% below 2025 levels through year-end, NPI production growth could slow, and the cost floor could rise. Buyers should monitor Indonesian ore prices monthly — if they rise above $45/wmt, NPI costs approach $17,000/mt and LME nickel may follow. For Q4 and 2027 contracts, the risk is that ore constraints and production cost inflation narrow the surplus and support prices $1,000-2,000 above current levels.