Indonesian Drought Squeezes Nickel for EV Batteries

Owners and shoppers of electric vehicles may see tighter battery supply as Indonesian nickel output falls.

Updated on Nov. 3, 2026 in Electric Vehicles

Isometric editorial illustration of plain steel leaching vessels and pipework over cracked dry earth beside a nearly empty reservoir, suggesting drought-hit nickel processing. — Severe drought in Indonesia is forcing Nickel Industries to cut a Central Sulawesi facility from 50 to 30 per cent capacity, squeezing EV battery supply. AI Illustration. Upload story photo >

Live Poll

Are you planning to buy an electric vehicle in the next year?

Severe drought in Indonesia, the world's largest nickel producing hub, is forcing refiners to cut output of the metal used in electric vehicle batteries. Nickel Industries reduced a Central Sulawesi acid-leaching facility from 50 to 30 per cent capacity.

Why it matters

Nickel is a core input for EV batteries, so cutbacks in Indonesia can tighten supply for battery makers and the vehicles built with their cells. A powerful El Nino weather pattern that took hold during the summer is fanning the drought, and the shortage lands on an industry where China already produces roughly 80 per cent of EV battery cells.

The Central Sulawesi acid-leaching facility run by Nickel Industries dropped from 50 to 30 per cent capacity. CRU Group projects nickel mixed hydroxide precipitate output will fall to about 370,000 tonnes in the second half of the year, below the previously expected 400,000 tonnes.

The players

Nickel Industries

A Sydney-based company that operates the Central Sulawesi acid-leaching facility whose output was cut from 50 to 30 per cent capacity.

CRU Group

A commodities research firm whose report projects continued industry cutbacks and nickel output falling to about 370,000 tonnes in the second half of the year.

Nanyang Technological University

A Singapore university whose report examined the supply constraints facing Chinese investors in Indonesia's high-pressure acid-leaching refineries.

ISEAS

The ISEAS-Yusof Ishak Institute, a Singapore research institute that contributed to the regional analysis of Indonesia's nickel sector.

The details

Nickel is extracted through high-pressure acid leaching, a process that requires huge volumes of water. As rainfall drops sharply, water shortages are forcing these operations to run at lower rates, and CRU Group says similar cutbacks across the industry are expected to continue through this month. Much of Indonesia's refining capacity is tied to Chinese investment, with about three-quarters of the nickel refining industry backed by Chinese capital. Chinese investors in high-pressure acid-leaching refineries were already facing supply constraints under tightening environmental and safety rules, and the drought adds to that pressure.

Summer 2026: A powerful El Nino weather pattern took hold and began the drought.
August 2026: A Nanyang Technological University report on Chinese investor supply constraints was published.
October 2026: CRU Group published its report on acid-leaching output cuts.
November 2026: CRU expects industry-wide cutbacks to continue this month.
Second half of 2026: Mixed hydroxide precipitate output is projected to fall to 370,000 tonnes.

The Home Front

China produces roughly 80 per cent of the world's EV battery cells, and about three-quarters of Indonesia's nickel refining has Chinese investment. A drought-driven cut in Indonesian nickel output therefore links directly to the cost and availability of the batteries powering electric cars sold worldwide.

If you are shopping for an electric vehicle in the coming months, ask dealers whether battery pricing or delivery timelines are being affected by nickel supply. Keep your vehicle's battery warranty paperwork in an accessible place so you can reference coverage terms if you later have a service question.

The takeaway

Battery supply chains reach the household budget through vehicle prices and availability, so nickel shortages matter to anyone planning an EV purchase. Keep your battery warranty documents on file and confirm current delivery timelines with your dealer before committing.

What happens next

CRU Group expects the industry-wide cutbacks to continue through November 2026, and its projection of 370,000 tonnes of mixed hydroxide precipitate output applies to the second half of 2026.