An analyst says the nickel industry is no longer profitable for many business players as it is now facing major pressure due to overproduction, causing prices to drop drastically, a condition exacerbated by a shortage of nickel ore supply that has forced several smelters in Indonesia to cut production.

"Previously, smelter entrepreneurs could get their capital back in just two years. Now, there is no profit at all in this industry," Jim Lennon, analyst at Macquarie Group, said as quoted by businesstimes.sg on Tuesday, March 4, 2025. 

This crisis has begun to shake several large companies, such as Gunbuster Nickel Industry, one of the largest nickel smelters in Indonesia with more than 20 production lines, which is experiencing financial difficulties to the point of delaying payments to suppliers. 

Bloomberg reported that its parent company in China, Jiangsu Delong Nickel Industry, has collapsed, further worsening Gunbuster's situation. 

Although Gunbuster claims its operations are still running normally with a change in management, a number of small smelters in Java have cut production to a minimum or even stopped operating.

The location of the smelter is far from the nickel mining center in Sulawesi, making the cost of shipping ore even more of a burden on their finances. 

Secretary General of the Indonesian Nickel Miners Association (APNI), Meidy Katrin Lengkey, said that in the past decade Indonesia has become a dominant player in global nickel industry, supported by Chinese technology and cheap coal-based energy. 

"This advantage helps Indonesia control more than 63 percent of the world's nickel production, in line with the government's ambition to improve the manufacturing sector," Meidy spoke to Indonesia Business Post in her office in Jakarta, on Tuesday, March 4, 2025. 

However, the surge in production has resulted in a plunge in nickel prices over the past two years, weakening the competitiveness of global nickel producers.

Now, as nickel prices approach their lowest point since 2020, the impact is also starting to be felt domestically. Plunging demand and the scarcity of nickel ore have worsened the condition of the smelter industry in Indonesia. 

This condition is a major challenge for the government and nickel industry players in Indonesia. 

If prices continue to fall and ore supply remains limited, many smelters are at risk of going out of business, threatening thousands of jobs and investment in the mining sector.