A pause on new semi-finished nickel smelters puts value per tonne at the centre of downstreaming

A measured brake on intermediate capacity

On Wednesday, 7 October 2026, Bahlil Lahadalia, who serves as Coordinating Minister for Downstreaming and Energy Transition as well as Minister of Energy and Mineral Resources, said the government is considering a moratorium on new nickel smelters that produce semi-finished products. The products in question, as listed by ANTARA, are nickel pig iron (NPI), ferronickel, nickel matte and mixed hydroxide precipitate (MHP). These intermediates form the bulk of what Indonesian smelters ship today. Bahlil said he would report the option to President Prabowo Subianto.

The reasoning is straightforward supply management. According to detikFinance, CNBC Indonesia, VIVA and ANTARA, the minister pointed to a global nickel surplus of around 2.5 million tonnes, which has been weighing on world prices. He added that the government would begin selecting which smelter projects should continue and which should be paused, so that the country's mineral wealth is not drawn down faster than the market can reward it.

The announcement arrives one week after the creation of the new coordinating ministry, which recorded Rp300.1 trillion of downstreaming investment in the first half of the year. That earlier milestone was about the scale of capital flowing into processing. This week's signal is about its composition: which kinds of processing Indonesia should add more of, and which it already has in sufficient supply.

"We will start selecting which industries continue and which need a moratorium, so that the management of our natural resources is not excessive." Bahlil Lahadalia, as reported by Liputan6 and kumparan

The policy, as described, has two parts. The first is a possible moratorium on new semi-finished capacity. The second is a more flexible approach to existing capacity. VIVA, CNBC Indonesia and Shanghai Metals Market (SMM) all report that installed capacity would not automatically translate into full production. As SMM put it, even if installed capacity reaches 10, not all of it may be allowed to run while the surplus persists. The government is still calculating the price conditions that would trigger such adjustments.

What 2.5 million tonnes and 50 to 60 percent actually describe

Two figures anchor the announcement, and both deserve careful reading.

The first is the surplus of about 2.5 million tonnes. Most outlets, including CNBC Indonesia, VIVA and ANTARA, present it as the size of the global oversupply. Some summaries describe the same number differently, as installed capacity or as ore production in a state of oversupply. The direction of the argument is the same in every version: supply has run ahead of demand, and prices have responded.

The second is the 50 to 60 percent figure. ANTARA, VIVA and CNBC Indonesia describe it as the share of current smelter output that remains semi-finished. Katadata and kumparan frame it as the degree of processing that most smelters achieve, meaning ore is taken only part of the way along the chain before export. Both readings support the same policy logic. A large part of Indonesia's nickel leaves the country at an intermediate stage, is refined or manufactured abroad, and in some cases returns as finished goods. Sirkularium reports both framings here because the distinction matters for any future measurement exercise.

Context from Katadata adds historical depth. Government data from 2023 counted 44 smelters using pyrometallurgical processes, largely feeding stainless steel, against three using hydrometallurgical processes oriented to the battery chain. The same outlet recalls that a similar discussion about limiting Class II nickel smelter permits took place in 2023 under the then Energy Minister Arifin Tasrif. The current proposal therefore builds on an established line of policy thinking rather than starting from scratch.

The value ladder in numbers

The case for steering investment upward is clearest when prices along the chain are set side by side. The Indonesia Nickel Price Index (INPI), published by the Indonesian Nickel Miners Association (APNI) together with SMM, gave the following readings on 5 October 2026:

• Nickel ore at 1.2 percent grade: US$25.5 per tonne CIF, down US$1 from 28 September.
• Nickel ore at 1.6 percent grade: US$59 per tonne CIF, down US$4.4.
• NPI: US$134.65 per tonne FOB as published, up US$0.09.
• MHP: US$13,632 per tonne FOB, down US$46.
• High-grade nickel matte: US$15,055 per tonne FOB, down US$50.

A note on reading these numbers. INPI lists every product per metric tonne, but intermediate products are conventionally priced on their contained nickel, and the NPI figure in particular follows a per nickel unit convention. The ratios between rungs are therefore indicative rather than exact multipliers. Even so, the ladder is unmistakable. Higher grade ore earns more than twice the price of lower grade ore, and a tonne of nickel delivered as MHP or matte sits in a price bracket several hundred times above a tonne of raw ore. Each step up the chain multiplies the value attached to the same underlying resource.

The same index also shows how oversupply transmits through the chain. Between 28 September and 5 October, ore and the hydrometallurgical and matte intermediates all eased, while NPI moved up only marginally. When intermediate supply is abundant, the discount falls first on the products that are easiest to substitute. Finished products with specific customers and specifications tend to hold value more steadily.

A moratorium on intermediate capacity is, in economic terms, a decision to compete on value per tonne rather than tonnes per year.

Strong exports give room to choose

The proposal comes from a position of strength. Ministry of Trade data reported by nikel.co.id show that exports of nickel and nickel articles under HS code 75 grew 50.12 percent in January to August 2026 compared with the same period of 2025. Aluminium and its articles (HS 76) rose 102.25 percent and copper and its articles (HS 74) rose 47.13 percent over the same period. Overall exports reached US$193.64 billion, up 4.74 percent, with the processing industry accounting for US$159.55 billion, or 82.40 percent of the total. Minister of Trade Budi Santoso described manufactured products as an increasingly important engine of foreign trade.

Liputan6 and kumparan report that Bahlil set the longer arc of this growth in context: nickel export value has climbed from about US$3.3 billion in 2017 to a potential US$38 billion to US$40 billion in 2026. That is roughly a tenfold rise within a decade, achieved largely through the first wave of smelter construction.

The moratorium option should be read against that record. The first phase of downstreaming established processing scale. The second phase can now be more selective, favouring capacity that carries ore further along the chain into products such as battery precursors, cathode materials, stainless steel products and alloys. CNBC Indonesia also reports Bahlil's reminder that minerals, unlike agricultural crops, do not grow back. A finite resource earns its best return when each tonne extracted is converted into the highest value it can reasonably reach.

How a valuation baseline supports the policy

Bahlil has said the selection of which projects continue is still being worked out, and that the price thresholds for production adjustments are still being calculated. Both tasks are, at heart, valuation exercises. They require the government and industry to agree on a common way of answering three questions.

First, how much value does each tonne of ore retain in Indonesia at each processing stage? A consistent value per tonne metric, built from published benchmarks such as INPI and the government reference price, would let policymakers compare a proposed NPI line with a proposed precursor or cathode plant on equal terms.

Second, what does a surplus cost the national economy? When 2.5 million tonnes of excess supply depresses prices, every tonne Indonesia sells earns less. Estimating the revenue difference between a managed and an unmanaged supply path gives the moratorium a clear, quantified rationale that investors can understand.

Third, what is the full value of a tonne kept in the ground? Bahlil's emphasis on future generations points toward natural capital accounting. A reserve that is extracted later, into a higher value chain, can be worth more than one extracted now into a saturated intermediate market. Ecosystem services lost or retained, reclamation obligations, and the environmental economic loss methodology already set out in Permen LH No. 7 Tahun 2014 all belong in that comparison.

Measured this way, the moratorium becomes a portfolio decision grounded in data rather than a simple restriction. It also gives existing operators a fair basis for planning: projects that can demonstrate a clear step up in retained value would have a transparent pathway to proceed.

Sirkularium's view

Sirkularium regards the moratorium option as prudent supply management at the right moment. Indonesia has built processing scale quickly, exports are growing strongly, and the government is now in a position to shape the next layer of investment toward finished and higher value products. A pause on new intermediate capacity during a period of global surplus protects prices for existing producers and preserves ore for the processing routes that will earn the most from it.

The policy will be strongest if it rests on a shared valuation baseline. Sirkularium suggests three practical steps for government and public institutions. The coordinating ministry and ESDM could publish a standard value per tonne measure for each processing stage, using INPI, reference prices and customs data on a consistent nickel content basis. Project selection could then compare proposed smelters on retained value, energy and water intensity, and reclamation commitments together. And mining operators could be encouraged to commission independent economic valuation of their concessions, combining GIS land cover mapping with ground data and the Permen LH No. 7 Tahun 2014 methodology, as an ongoing practice that supports permits, financing and long term planning.

What to watch next: the report Bahlil will deliver to President Prabowo, the price thresholds the ministry settles on for output adjustments, how existing permits for intermediate projects are treated, and whether the next INPI readings show intermediate prices stabilising as the market absorbs the signal. Each of these will help translate a sound principle into a measurable gain in the value Indonesia keeps from every tonne of nickel.