Chinese Nickel Producers Plan to Coordinate ~30% Production Cuts in Indonesia
nashnova research
Tsingshan, GEM and other Chinese firms met over the past week to discuss jointly cutting Indonesian nickel output by roughly 30%, but no deal has been reached and coordination remains the key uncertainty.
Who is talking, and about what?
Bloomberg, citing people familiar with the matter, reports that Tsingshan Holdings, GEM Co., Lygend Resources & Technology, and Zhejiang Huayou Cobalt — all operators of nickel smelters in Indonesia — held meetings over the past week on a coordinated production cut.
One proposal on the table: each company would trim roughly 30% of capacity at its HPAL plants — high-pressure acid leach facilities that extract nickel and cobalt from ore using hot sulfuric acid. The target product is mixed hydroxide precipitate (MHP), a battery feedstock containing nickel and cobalt.
No agreement has been reached. Some participants see coordinated cuts as very difficult to execute. None of the four companies responded to requests for comment.
Why now?
Indonesia's government raised nickel ore prices to boost state revenue, squeezing smelter margins directly.
Middle East tensions have pushed up the cost of sulfur, a critical input for the HPAL process; shifts in mining quotas and commodity-export policies are adding further pressure.
This means → costs are rising on multiple fronts while revenue is falling at the same time: refined nickel prices dropped sharply in June, and cobalt prices have also retreated after the Democratic Republic of Congo eased export restrictions, releasing fresh supply.
In plain terms = raw materials cost more, finished products sell for less — squeezed from both sides, companies either cut output or run at a loss.
Is there a precedent?
Huayou Cobalt moved first in April, citing surging sulfur costs, and cut output at a major nickel plant in Weda Bay, Indonesia, by roughly 50%.
This reflects a single company already buckling under cost pressure and pulling back on its own.
The current discussion is broader — multiple firms, coordinated — but whether it can produce a binding agreement remains the key variable.
What does it mean for the market?
If the cuts go through, MHP supply would tighten meaningfully — and MHP is a core intermediate in the EV battery supply chain.
This means → downstream battery makers could face higher nickel-cobalt procurement costs, especially given Indonesia's outsized share of global nickel supply.
But coordinated cuts are notoriously hard to enforce: each firm has a different cost structure and capacity-investment timeline. Whoever cuts first loses market share first. Put simply = everyone agrees on the logic, but no one wants to be the first to swing the axe.
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