Amid expectations that the world’s largest producer may tighten supply, LME nickel prices rose for the third consecutive trading day, continuing their rebound from an eight-month low.

During European trading hours on Friday (December 19), LME nickel prices climbed about 1.3%, reaching $14,732 per tonne. On Wednesday, nickel prices had briefly fallen below $14,200, hitting their lowest level since April of this year.

Two days ago, Indonesia announced a plan to cut nickel ore production in 2026. According to the Indonesian government’s work plan and budget for next year, the target for nickel ore production in 2026 is approximately 250 million tons, nearly one-third lower than the 2025 target of 379 million tons.

Indonesia holds the world’s largest nickel reserves, accounting for 40% to 45% of global nickel reserves. Since 2020, the Indonesian government has banned the export of unprocessed nickel ore, requiring exporters to set up processing plants within Indonesia, thereby transforming the country from a mere resource exporter into a resource-processing nation.

Analysts believe that Indonesia’s proposed production cuts this time are mainly a response to the decline in nickel prices. Nickel is widely used in stainless steel and electric vehicle batteries. Due to the waning momentum of EV policies in Europe and the U.S., nickel prices have fallen by more than 3% so far this year, making it the only industrial metal on the LME to end the year in the red.

Analysts say that with nickel prices already falling close to Indonesia’s production costs, Indonesia’s production-cut plan poses a risk for bearish investors. Recently, some investors have pulled out of arbitrage trades involving base metals such as copper and aluminum, which may have also fueled this week’s price rebound.

In addition to reducing mining capacity, Indonesia’s Ministry of Energy and Mineral Resources (ESDM) also plans to revise the benchmark pricing formula for nickel ore in early 2026.

Meidy Katrin Lengkey, Secretary-General of the Indonesian Nickel Mining Association (APNI), revealed that one of the key points of the revision is that the government will begin treating nickel-related minerals—especially cobalt—as separate commodities and impose royalties on them.

Meidy said in an interview on Wednesday: “Nickel is often accompanied by a wide variety of minerals, including cobalt and iron. These accompanying minerals themselves are also quite valuable—for example, cobalt can be processed into raw materials for nickel-cobalt-manganese (NMC) batteries.”

“If cobalt can be counted and classified as a secondary mineral, a royalty rate of 2% or 10% could be imposed, generating additional revenue for the government. Considering that the price of cobalt is twice that of nickel, even if the cobalt content in nickel is only 0.1%, this revenue would still be substantial.”

The cobalt content in nickel ore traded from 2023 to 2024 is approximately 0.1%, and Meidy pointed out that if a royalty were imposed on this associated cobalt, the Indonesian government could potentially generate an additional revenue of around 600 million US dollars.

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