Indonesia Reverses 30% Nickel Royalty Hike as 34% Ore Cuts Trigger Output Pullback
Updated
Updated · Asia Times · Jun 17
Indonesia Reverses 30% Nickel Royalty Hike as 34% Ore Cuts Trigger Output Pullback
2 articles · Updated · Asia Times · Jun 17
Summary
May 11 marked a full reversal of Indonesia’s higher nickel royalty less than a month after it took effect, after Chinese-backed producers began cutting output and smelter operating rates fell.
The rollback followed a broader squeeze: Jakarta had cut its 2026 nickel ore quota to 250 million tonnes from 379 million and raised low-grade ore royalties to 30% from 17%, sharply lifting costs.
China’s shift away from nickel weakened Indonesia’s leverage, with LFP batteries taking 81% to 82% of new installations in China in early 2026 and sodium-ion batteries expanding as another nickel-free alternative.
Investor confidence was already deteriorating as foreign firms complained of erratic rules, corruption and tighter controls; the rupiah fell past 18,000 per dollar in June and Fitch cut Indonesia’s outlook to negative in March.
The reversal also came after Indonesia’s bid for regional supply coordination faltered, underscoring how resource nationalism is colliding with weaker long-term nickel pricing power and rising competition for investment in Southeast Asia.
As China's new batteries kill nickel demand, has Indonesia’s resource nationalism strategy backfired?
With policy U-turns and a plunging currency, can Indonesia's president regain global investor trust?
Indonesia Halts 2026 Nickel Royalty Increase: Policy U-Turn Exposes Risks in Resource Nationalism Strategy
Overview
In May 2026, Indonesia reversed its earlier plan to sharply increase nickel royalties, signaling a major policy shift. The government proposed new royalty rates to balance national goals with the challenges faced by producers. Central to this change is the RKAB quota system, which strictly limits how much nickel ore can be mined each year. For 2026, the quota is set at 270 wet metric tonnes, which is not enough to meet demand. This tight supply, combined with the revised royalty approach, directly affects the nickel supply chain from mining to processing, creating uncertainty for both local producers and the global market.