Indonesian Metals Sector: A potential 2026 nickel quota boost, but probably unrealistic

Research evidence excerpt

Indonesian Metals Sector: A potential 2026 nickel quota boost, but probably unrealistic

ord a topline boost, even assuming a likely lower lachlan.shaw@ubs.com

nickel ore price led by higher nickel ore supply and smelters may record a margin +61-3-9242 6387

rebound on input cost relief. Sharon Ding

Analyst

Key debates around the potential plan sharon.ding@ubs.com

+852-2971 6284

1) Ramp up challenges: Adding 100m wmt in H226F suggests a 67-77% HoH output

ramp for miners after the major RKAB cut in H126. We believe attaining the ramp in Myles Allsop

nickel ore output in H226 is challenging given mining capacity limitations (a sudden Analyst

myles.allsop@ubs.comchange in mine design plan) and the higher potential for mining accidents to meet the

+44-20-7568 1693

target. For context, the 2025 RKAB of 379m wmt was far above the 310-320m wmt

production, implying output ramp constraints. 2) Lengthy approvals likely required:

It could be time consuming for the regulator to expedite the RKAB approval as it involves

a thorough, complex and lengthy process including an environmental study (AMDAL), a

feasibility study (FS) and verified permits that overlap with other ministries. 3) Pricing

impact:We believe the potential RKAB may not quickly affect laterite ore prices, as the

higher nickel ore grade would sustain pricing power on depleted saprolite grades

globally.

How to gauge the regulator's view and its effect on equities

If the RKAB relief is made official, we think: 1) this could be a regulatory response to the

recent difficulties in the nickel industry after a smelter declared Chapter 11 (PT

Gunbuster Nickel Industry) and miner PT Weda Bay Nickel halted production and cut its

workforce. While we would understand the regulator's desire to ease the burdens on