Chinese stainless steel giant Tsingshan Holding Group Co has suspended several production lines in Indonesia’s nickel hub since early May, in what industry insiders say is a direct response to plunging nickel prices and weakening global demand.

Chairman of the Mining Engineering Division at the Indonesian Engineers Association (PII), Rizal Kasli, confirmed that the company’s decision was purely economic.

“This is simply due to falling prices. They’re losing money, so they stop operations. That’s it,” Rizal told reporters on the sidelines of the 2025 ESG Forum on Monday, June 2, 2025.

Nickel is currently trading at US$15,237 per ton on the London Metal Exchange (LME), down 0.90 percent from the previous week. This marks a continued downward trend after prices hit a four-year low in 2024, well below earlier projections of US$20,000 per ton, according to market research firm BMI, a Fitch Solutions company.

Average prices in 2023 had already slipped 15.3 percent year-on-year to US$21,688 per ton amid a supply glut and sluggish demand, triggering a wave of concern across the nickel industry.

Job loss risks

Despite Indonesia’s rich nickel reserves, Rizal pointed out that many local smelters, including those run by Tsingshan still rely on imported ore due to insufficient domestic supply. This reliance, he said, further erodes profitability when nickel prices dip.

“When global prices are low, and they still have to source raw material from abroad, their operational costs can’t be sustained. So they suspend operations temporarily,” he cited.

The production freeze could also trigger significant workforce reductions. “Layoffs are possible. Continuing operations means higher overhead wages, overtime, benefits. It’s all a burden,” Rizal warned.

Moreover, Tsingshan’s pause in production could further strain domestic nickel mining, reducing ore absorption and affecting upstream suppliers.

Citing sources familiar with the matter, Bloomberg reported that Tsingshan halted several stainless steel production lines at its facilities in the Indonesia Morowali Industrial Park (IMIP) to curb oversupply and stabilize prices amid declining global demand and trade uncertainty triggered by escalating U.S.-China tariffs.

The facilities are currently undergoing maintenance, with no timeline for resumption. One of the associated rolling mills has also ceased operations. Tsingshan has yet to respond to requests for comment.

Strategic shutdown

Founded in the 1980s, state-owned Tsingshan is among the world’s largest stainless steel producers. Its Indonesian subsidiary, PT Indonesia Tsingshan Stainless Steel (ITSS), is 50 percent owned by Tsingshan Holding Group and 20 percent by Ruipu Technology Group, with remaining shares held by Tsingtuo Group, Hanwa Company, and Indonesia’s PT IMIP.

ITSS has operated under an industrial business license (IUI) since 2019, valid through 2049. Beyond ITSS, Tsingshan controls multiple entities in Indonesia, including PT Sulawesi Mining Investment Indonesia, PT Guangqing Nickel Corporations Indonesia, and PT Dein Baja Indonesia.

Combined, Tsingshan’s operations in Morowali boast annual capacities of 3 million tons of stainless steel, 2 million tons of nickel pig iron (NPI), and 3.5 million tons of carbon steel.

According to Macquarie Group data, Tsingshan accounted for nearly a third of global stainless steel production in 2024. With Indonesia now dominating global nickel reserves, Tsingshan’s Morowali investments were seen as a strategic linchpin for its global supply chain.

But the strategy now faces headwinds. China's slowing economy has dragged down domestic demand, while rising tariffs under U.S. President Donald Trump have squeezed the export competitiveness of both Chinese and Indonesian producers.

As the nickel industry adjusts to this new reality, questions loom over the sustainability of large-scale nickel industrialization in Indonesia, especially amid global shifts in demand, trade policy, and the energy transition.