Indonesia formally issues commodity export control rule amid nickel supply crunch

Nickel Supply Deficit Projected as Indonesia Policy Shifts and Iran War Disrupt Markets

The global nickel market is set to record its first supply shortfall in years, as Indonesia’s sweeping moves to centralize commodity exports and the ongoing conflict in Iran converge to tighten availability of the battery metal.

INSG Forecasts Rare Deficit

The International Nickel Study Group, following meetings in late April, forecast a supply deficit of 32,000 metric tons for 2026 — replacing a previous projection of a 261,000-ton surplus. Global primary nickel production is expected to reach 3.715 million tons against consumption of 3.747 million tons, marking the first shortfall after three consecutive years of massive oversupply.yieh

Nickel prices have climbed more than 20% over the past year, with the monthly average reaching $18,806 per metric ton in May. Bloomberg reported in late April that nickel rose to its highest level in nearly two years as reduced mining quotas in Indonesia and a global sulfur shortage tightened the supply outlook.bloomberg

Indonesia’s Export Centralization Rattles Investors

Indonesia, which dominates global nickel production, formally issued a regulation on Friday to bring exports of strategic commodities under centralized control through a new state-owned enterprise, PT Danantara Sumberdaya Indonesia. President Prabowo Subianto first announced the policy on May 20, declaring that all sales of the country’s resources must pass through government-appointed entities.reuters

The regulation took effect June 1, initially covering coal, palm oil, and ferroalloys, with additional commodities to be added on a quarterly basis. Although nickel pig iron was reportedly excluded from the initial scope, Reuters reported on Wednesday that Chinese investors who helped build Indonesia’s nickel industry are now scouting alternatives in Africa as policy pressure mounts.reuters

Indonesia’s 2026 nickel ore mining quotas were slashed to roughly 260 million tons from 379 million tons in 2025 — a reduction exceeding 34% — falling far short of estimated smelter requirements of 340-350 million tons.sunsirs

Sulfur Crisis Adds to Supply Squeeze

The Iran war has compounded the supply crunch by disrupting sulfur flows from the Gulf, which account for about a quarter of global supply. The closure of the Strait of Hormuz on February 28 has sent sulfur prices to unprecedented levels, forcing Indonesian high-pressure acid leach processors to cut output by at least 10%. Macquarie estimates the sulfur price surge added thousands of dollars per ton to Indonesian HPAL nickel production costs.reuters

The dual pressures of Indonesia’s tighter quotas and the sulfur squeeze have created what analysts describe as a “double cost squeeze” for processors that rely on both nickel ore feed and sulfuric acid. S&P Global analysts indicated in late April that prices are expected to remain elevated through 2026 as a result.geomechanics