Tarrifs and Trade Wars .
Senareo 1: China’s Reduced Demand for Indonesian Nickel (NPI Focus)
China’s Market Exclusion: With U.S. (145% tariffs) and EU restrictions shutting China out, China can’t sell its stainless steel and other nickel-containing products to Western markets . This reduces China’s manufacturing output, particularly for stainless steel, which relies heavily on Indonesian NPI.
Lower Nickel Demand: China, consuming 55% of global primary nickel (much of it as NPI for stainless steel , now needs less Indonesian nickel. In 2023, Indonesian NPI was the largest-volume trade category between the two countries, growing 47% . A drop in this demand directly hits Indonesia’s NPI-focused industry.
Impact on Indonesia’s Nickel Industry
Severe Hit to NPI Sales:
Revenue Collapse: NPI, the backbone of Indonesia’s nickel exports, faces a demand crisis. With China needing less NPI for stainless steel, Indonesia’s export revenues plummet. The majority of Indonesia’s 2.4 million tons of nickel output in 2025 is NPI, and stainless steel demand has historically driven production.
Export Redirection Challenges: Indonesia may try redirecting NPI to other markets (e.g., Southeast Asia, India), but these regions can’t absorb the volume China did. For example, Indonesian Employers Association (APINDO) noted that neither domestic nor global markets can fully absorb the output of Indonesia’s rapidly growing rotary kiln electric furnace (RKEF) smelters, exacerbated by a weaker global economy.
Bankruptcy and Shutdown Risks:
Financial Strain: Many Indonesian NPI producers operate on thin margins, with production costs around $12,000–$15,000/ton. With nickel prices at $15,078/ton (forecast at $15,700 for 2025 , a demand drop could make operations unprofitable, leading to bankruptcies, especially for smaller smelters.
Shutdown Potential: High-cost NPI producers may shut down if they can’t sell their output. For instance, smelters in industrial parks like IMIP and Weda Bay, which process 13 million tons of nickel ore annually, could scale back or close if China’s demand doesn’t recover
Feasibility of Restarting to Fill the Supply Gap
Timeline: Mines in care and maintenance can typically restart within 6–12 months, depending on the extent of preservation, workforce availability, and equipment readiness. BHP’s AU$450 million annual investment in Nickel West facilities indicates a high state of readiness . Wyloo and IGO’s operations, similarly preserved, could follow a similar timeline .
Capacity to Fill Gap: If BHP, Wyloo, IGO, and others restart, Australia could potentially add back 90,000 tons of annual production , the difference between 150,000 tons pre-closures and 60,000 tons post-closures . This is significant but small compared to Indonesia’s 2.4 million tons, meaning Australian restarts alone can’t fully replace Indonesian supply. However, they can help bridge the gap for Western markets seeking non-Chinese nickel.
Economic Viability: Current nickel prices ($15,078/ton, forecast at $15,700 for 2025 are near production costs ($12,000–$15,000/ton), making restarts marginal without a price increase. A “green nickel price premium,” advocated by Wyloo and supported by Australia’s government, could incentivize restarts by differentiating Australian nickel’s ESG credentials .
Challenges: Labor shortages, rising costs noted by BHP as a factor in closures and regulatory hurdles could delay restarts. Additionally, some operations (e.g., Panoramic) may require new ownership or investment to resume.
Impact on Global Nickel Prices
Short-Term (2025): Increased Western demand and Indonesian NPI shutdowns (due to reduced Chinese demand) could tighten supply . Australian restarts adding 90,000 tons may stabilize prices by meeting some Western demand,.
Medium-Term (2027–2028): If Indonesian NPI producers shut down significantly, global supply could contract by hundreds of thousands of tons. Australian restarts, combined with new Western supply chains e.g., Canada, Philippines ,Mulga Tank , could push prices toward $20,000/ton as supply tightens.
Long-Term (2030): With EV demand tripling nickel needs, a supply deficit could drive prices to $20,000–$25,000/ton, especially if Indonesian supply remains offline and Australian producers fill the gap.
Conclusion
Wyloo, BHP, IGO, and other shut-down Australian nickel operations could come online within 6–12 months to help fill the supply gap as the West decouples from Chinese nickel. Their combined capacity (up to 90,000 tons) can partially meet increased Western demand, stabilizing prices in the short term and supporting a rise to $20,000–$25,000/ton by 2030 if Indonesian NPI supply shrinks. WMG benefits long-term as a Western nickel source, despite near-term price challenges.
Scenario 2: Disappearance of Demand for Chinese Nickel
Western Decoupling: The U.S. (145% tariffs) and EU (supply chain restrictions) have excluded Chinese-processed nickel, rendering China’s nickel products (including Indonesia’s output, 75% Chinese-refined) obsolete in Western markets .
China’s Demand Collapse: With China unable to sell stainless steel and other nickel-containing products to the West, its manufacturing sector contracts significantly. Stainless steel, which accounts for 70% of global nickel demand and relies heavily on Indonesian NPI, sees a sharp demand drop . China, consuming 55% of global primary nickel (mostly as NPI , drastically reduces its purchases from Indonesia.
Supply Surplus Irrelevance: The global nickel surplus (87,000 tons in 2025 ) becomes irrelevant because the demand for Chinese-processed nickel, including Indonesia’s 2.4 million tons of annual output (over 56% of global supply ), disappears in Western markets and shrinks in China due to its own economic contraction (GDP growth down 2.4% in 2025 due to trade war).
Impact on Indonesia’s Nickel Industry
Demand Collapse:
NPI Market Crashes: Indonesia’s nickel industry, where most output is NPI for stainless steel, faces a catastrophic demand drop. China, the primary buyer of Indonesian NPI (47% trade growth in 2023), no longer needs as much due to its inability to export stainless steel. Western markets, previously a smaller but growing destination, are now closed to Indonesian NPI due to its Chinese refining ties.
Revenue Loss: Indonesia’s nickel sector, a key economic driver, sees export revenues plummet. especially with global Chinese stainless steel demand collapsing .
Widespread Shutdowns:
Bankruptcies: With nickel prices at $15,078/ton (forecast at $15,700 for 2025 and production costs at $12,000–$15,000/ton, many Indonesian NPI producers become unprofitable as demand vanishes. Smaller smelters in industrial parks like IMIP and Weda Bay (processing 13 million tons of ore annually are at high risk of bankruptcy.
Industry Collapse: Without Chinese demand, large-scale shutdowns are likely. Even state-backed firms like PT Vale Indonesia or Antam may struggle, though government intervention (e.g., subsidies) could delay closures. Indonesia’s battery-grade nickel sector, e.g., Hyundai-LG’s $1.1 billion plant is too small 3% of global demand in 2020 to offset the NPI demand loss.
Supply Contraction:
Immediate Impact: If Indonesia’s nickel industry shuts down, global supply could drop by up to 2.4 million tons annually, a massive reduction from the 4.2 million tons of global production in 2025 This effectively eliminates the 87,000-ton surplus and creates a supply deficit, especially as Western demand rises.
Impact on Global Nickel Prices
Immediate Supply Shock:
Deficit Emerges: With Chinese-processed nickel demand disappearing, the surplus becomes irrelevant . And if Indonesian production halts, global supply shrinks significantly, creating an immediate deficit as Western demand grows for non-Chinese nickel.
Price Surge: Nickel prices could spike rapidly. Current prices ($15,078/ton, forecast at $15,700 for 2025 might jump to $20,000/ton or higher within 12–18 months as supply tightens. This aligns with long-term forecasts of $20,000–$25,000/ton by 2030 due to EV demand, but the timeline accelerates.
Australian Restarts Mitigate Shock:
Wyloo, BHP, IGO: As discussed, BHP’s Nickel West (80,000–90,000 tons capacity), Wyloo’s Kambalda mines, IGO’s Cosmos project, and others (e.g., Ravensthorpe, Savannah) could restart within 6–12 months, adding up to 90,000 tons annually, this helps meet Western demand but is a fraction of Indonesia’s 2.4 million tons, so prices remain elevated.
Price Stabilization: With Australian supply coming online, prices might stabilize at $18,000–$20,000/ton by late 2026, balancing new supply with growing Western demand.
Long-Term Dynamics:
Sustained High Prices: EV demand is projected to triple nickel needs by 2030 and if Indonesian supply remains offline, prices could stay at $20,000–$25,000/ton, supported by a “green nickel price premium” for Australian producers .
Impact on Western Mines Group (WMG)
Immediate Boost: A price spike to $20,000/ton makes WMG’s Mulga Tank project more attractive, driving investor interest. FinClear’s accumulation of 507,168 shares (net value $55,432) from March 11 to April 14, 2025, positions them to benefit from this rally.
Long-Term Growth: As a Western nickel source, WMG is well-placed to capitalize on sustained high prices and demand for non-Chinese supply. Its early-stage status means it won’t produce immediately, but it could attract M&A interest from majors like BHP or IGO looking to secure future supply.
Conclusion
With demand for Chinese-processed nickel disappearing, Indonesia’s NPI-heavy industry faces collapse, eliminating the global surplus and creating a supply deficit. Nickel prices could surge to $20,000/ton within 12–18 months, stabilizing at $18,000–$20,000/ton by 2026 as Australian operations like BHP, Wyloo, and IGO restart (adding 90,000 tons). WMG benefits from higher prices and Western demand, enhancing its long-term prospects.
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