A major Chinese-controlled nickel smelter in Indonesia's core production region has reduced output due to its tailings pond nearing full capacity, highlighting growing waste management challenges in the nickel industry. According to informed sources, PT QMB New Energy Materials Co. Ltd., whose shareholders include Gem Co.,Ltd. (002340.SZ) and Tsingshan Holding Group Co., will maintain reduced production for at least two weeks.
Located in the Morowali Industrial Park on Sulawesi Island - Indonesia's largest nickel production base - the QMB facility has confirmed the production cut. A park representative stated: "The plant's tailings pond within the industrial park is approaching saturation, while approval documents for a new tailings pond remain under processing." Gem Co.,Ltd., QMB's largest investor, did not immediately respond to requests for comment.
Indonesia now accounts for over half of global nickel production, driven by Chinese-backed capacity expansion. Nickel, a crucial material for EV batteries and stainless steel, frequently employs the high-pressure acid leaching (HPAL) process that can process low-grade ores at relatively low costs but generates substantial waste requiring drying and compaction before storage.
The rapid nickel industry expansion has drawn increased regulatory scrutiny in Indonesia, partly due to environmental concerns about waste disposal. Experts question whether HPAL can maintain safe and sustainable operations in Indonesia's tropical archipelago environment, prone to heavy rains and earthquakes. Earlier this year, QMB's Morowali tailings pond experienced a fatal landslide that temporarily halted production.
HPAL producers also face rising sulfur procurement costs - sulfur being essential for sulfuric acid production. However, demand for HPAL-produced nickel-cobalt hydroxide (a nickel product containing cobalt) has seen strong support this year following cobalt export controls implemented by the Democratic Republic of Congo.
Amid generally weak performance across base metals this year, nickel has particularly underperformed due to severe oversupply depressing prices and squeezing industry profits. Commerzbank reports this situation stems primarily from surging supply, especially Indonesia's explosive production growth.
The International Nickel Study Group data shows global primary nickel production grew 5% last year and "is expected to increase another 8% this year," with projections indicating "7% further growth next year." The German bank notes that despite current oversupply, effective Indonesian regulatory measures could trigger significant market reversals.
Thu Lan Nguyen, Head of Commodity Research, emphasized that stricter domestic production controls by Indonesia could prompt rapid nickel price rebounds. Similar to recent reversals in other base metals, more stringent capacity regulations might trigger more dramatic nickel price surges.
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