Tsingshan asks some Indonesian nickel producers to cut output to free power for aluminium

Eramet

18/05/2026 11:28

Tsingshan move follows jump in aluminium margins

Nickel pig iron producers asked to cut output to redirect power to aluminium plant

Weda Bay industrial park has 22 NPI producers

By Dylan   Duan and Lewis Jackson

SHANGHAI/BEIJING, May 18 (Reuters) - China’s Tsingshan Group has asked nickel pig iron (NPI) producers at Indonesia’s Weda Bay industrial park to curb output in June to conserve electricity for aluminium production, three sources familiar with the matter said, a sign the group’s push into the light metal is starting to squeeze nickel operations.

Tsingshan made the request last week to producers of NPI, a key feedstock for stainless steel, the sources said, adding that the company was prioritising aluminium after a rally in prices increased margins for the power-intensive metal.

Tsingshan holds shares in the industrial park’s power plant and the move will redirect power from the area's 22 NPI plants, some of which are owned by the company, to its single aluminium plant, co-owned by Tsingshan and Xinfa.

All three sources declined to be named because they were not authorised to speak publicly, and they were not able to confirm the extent of the output cuts.

Benchmark three-month aluminium CMAL3 on the London Metal Exchange has risen by more than 12% since the start of the Iran war, which has disrupted shipments of the metal through the Strait of Hormuz and damaged aluminium facilities in the Gulf region, home to close to 9% of global supply.

The rally helped widen aluminium margins, which were already above those for NPI, which only have a less than 10% margin, the sources said.

Tsingshan did not immediately respond to an emailed request for comment.

POWER BOTTLENECK

Tsingshan uses captive coal-fired power plants to supply the Weda Bay park, which has more than 700,000 metric tons a year of nickel-in-NPI capacity, according to a May investor presentation by Eramet, Tsingshan’s partner in PT Weda Bay Nickel.

The park, on Indonesia's Halmahera Island, also hosts the Tsingshan-Xinfa Juwan aluminium project, which has an annual capacity of 250,000 tons.

Both NPI and aluminium smelting consume large amounts of electricity. Tsingshan’s expansion into aluminium has increased pressure on the park’s power supply, with captive power additions lagging the pace of smelter development.

“Building a captive power plant takes around 2 to 2.5 years, compared with less than a year for an aluminium smelter, which will constrain output below nameplate capacity,” said Rachel Zhang, head of China materials research at Morgan Stanley.

For Indonesian smelters, delivery times for power equipment have lengthened to around 21 months from 18 months in 2024, while costs have risen by roughly 30%, she said.

(Reporting by Dylan Duan in Shanghai and Lewis Jackson in Beijing; Editing by Kate Mayberry)

((dylan.duan@thomsonreuters.com;))