The enduring decline in the price of nickel is creating challenges for producers across the world, heightening concerns of widespread mine closures and reinforcing Indonesia's position as a dominant force in global supply.

Nickel, a crucial metal used in stainless steel and electric-vehicle batteries, has experienced a more than 40% drop in value over the past year due to an increasing global surplus. This downturn is putting significant strain on higher-cost operations and poses a substantial risk to new projects outside of Indonesia.

Australia has already felt the impact, with notable casualties such as Wyloo Metals Pty Ltd., owned by billionaire Andrew Forrest, announcing mine closures. BHP Group Ltd. has also revealed the partial closure of a processing plant, and First Quantum Minerals Ltd. has suspended one of its mines. Indonesia, responsible for half of the world's nickel supply, appears more resilient to production cuts. The nation has transformed into a global nickel hub, attracting billions of dollars in investment for efficient plants benefiting from affordable labor, low-cost power, and readily available raw materials.

Consequently, global supply is anticipated to continue rising despite output reductions in other regions. The influx of new supply from Indonesia over the past two years has outpaced demand, coinciding with challenges faced by metals markets amid a sluggish global economy. Softening demand growth from the electric vehicle (EV) sector has further exacerbated the challenges of nickel, with prices hovering around $16,000 a ton, near their lowest levels since 2021.

While Indonesia maintains its strong position, uncertainties loom, including a December accident prompting calls for tighter nickel industry regulations ahead of the upcoming presidential election. Signs of stress persist, with Glencore's decision to fund the struggling Koniambo Nickel mine until next month and potential closures of nickel plants in New Caledonia, as indicated by the French government.

Nikhil Shah, principal analyst for base metals at CRU Group, emphasizes that Indonesia's continuous nickel supply adds pressure for prices to decline further. This situation mirrors the dynamics in other battery-material markets, where prices have dropped due to unexpectedly robust supply growth. Nickel and cobalt demand have also suffered as electric vehicle manufacturers adopt battery types that exclude these metals.

Despite the potential for additional mine supply cuts, the nickel market is projected to remain in surplus this year, given the increased primary nickel output from Indonesia and China. Consequently, subdued nickel prices are expected to persist throughout the year.