Drought hits Indonesia's nickel industry, smelters in South Sulawesi plan to relocate 570 employees

According to SugarPos.co, by the end of August 2026, the El Niño climate phenomenon has begun to impact the downstream nickel processing industry in South Sulawesi, Indonesia. Affected by the sharp reduction in power supply, Bumi Sulawesi Mining (BMS)'s smelter has seen a drastic decline in operating capacity, and the company plans to temporarily place approximately 570 employees on standby.

This smelter belongs to the Kala Group, which uses the RKEF rotary kiln-submerged arc furnace process to produce ferronickel. The plant is highly dependent on local hydropower stations. Due to the drought brought by El Niño, river water volumes have dropped significantly, and the hydropower stations have severely insufficient output, directly limiting the production and operation of the nickel smelting facilities.

SMM was the first to disclose this energy supply crisis on Friday, August 28, 2026. The ongoing drought in the Luwu region has restricted the water supply necessary for the operation of the hydropower station's turbine units, which has become the core cause of the smelter's load reduction. According to multiple sources, the hundreds of employees on standby will still receive full salaries; however, the Kala Group's management has not yet issued an official response regarding the employee placement matter.

In response to market concerns, the Indonesian Nickel Industry Association (FINI) stepped in on Monday, August 31, to calm market sentiment, emphasizing that the difficulties faced by smelters in the Luwu region do not represent the overall situation of Indonesia's national nickel industry. Arif Perdana Kusuma, the association's chairman, stated that the remaining domestic nickel smelting and processing projects have not yet been directly impacted by El Niño. Field monitoring shows that core nickel industrial bases such as the Indonesia Morowali Industrial Park (IMIP) in Morowali have not yet experienced obvious production disruptions.

However, Indonesia's Meteorology, Climatology and Geophysics Agency (BMKG) warned that this round of drought is expected to last until April 2027, and the entire industry still needs to remain highly vigilant. The association stated that it has not yet calculated the specific loss figures that the extreme high-temperature drought will bring to this year's nickel output and export scale.

The existing smelter of Bumi Sulawesi Mining has an designed annual ferronickel production capacity of 33,000 tons, and the plant's power supply mainly relies on the hydropower station with a total installed capacity of 3×75 MW in Tana Toraja Regency. Affected by the continuous shrinkage of natural water inflow, this hydropower station can no longer output power at full load. If the drought situation does not improve, the production suspension of this smelter may disrupt the stability of the nickel raw material supply chain.

It is also learned that the company is advancing the construction of a second smelter, and the new project will adopt modern hydrometallurgical processes. Despite facing extreme climate risks, the company still strives to advance the construction of this project as originally planned.