BNI tightens monitoring of nickel borrowers as ore shortage pressures smelters

By Dominikus

State-owned lender PT Bank Negara Indonesia Tbk (IDX: BBNI) is stepping up monitoring of nickel-sector borrowers as ore supply disruptions begin to weigh on downstream producers, Ditya Maharhani Harninda, Senior Vice President of Corporate Banking 2 at BNI, said during a panel discussion at the Indonesia Critical Minerals Conference in Jakarta on Thursday.

Ditya said the challenges were not unique to BNI but were affecting banks across Indonesia with exposure to the nickel industry, as supply constraints and weaker selling prices test the resilience of downstream projects.

"This is actually a critical issue that we are facing right now, not just BNI, I suppose, but all banks in Indonesia are facing the same thing," she said.

BNI has conducted stress tests on its nickel downstream portfolio using scenarios that include lower production due to ore shortages and weaker average selling prices, she said.

The move comes as Indonesian nickel smelters face tighter ore availability following changes to the government's RKAB production quota approval process, which industry participants say has created supply gaps for smelting operations.

In response, BNI has tightened loan covenants for nickel borrowers. While the bank previously required clients to submit feedstock, cash flow and covenant compliance reports on a quarterly basis, it now requests the information monthly.

The bank also requires nickel borrowers to maintain feedstock inventories sufficient for 30 to 40 days of operations to reduce the risk of production disruptions, Ditya said.

In addition, borrowers must provide regular updates on feedstock availability, cash flow and smelter utilization rates. BNI also relies on an internal early warning system to identify emerging risks before they develop into larger credit issues.

"The third one, we internally have our system, an early warning system, that could detect emerging risks at an early stage, so we can do a tailor-made solution that is suitable for their condition," Ditya said.

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Arif Perdana Kusumah, chairman of the Indonesia Nickel Industry Forum (FINI), said during the same panel discussion that the ore supply gap was already affecting production and was no longer merely a projected risk.

He said several production lines in South Sulawesi and Central Sulawesi had entered idle status, with output falling to less than 50% of capacity. Operators, however, have avoided fully shutting down furnaces because restarting rotary kiln electric furnace (RKEF) units is costly.

Arif said FINI was not seeking a blanket increase in nickel ore quotas, as the association did not want to repeat the oversupply conditions experienced in 2024. Instead, it has proposed a dynamic RKAB allocation mechanism tied to actual industry demand.

The association has also proposed releasing around 20 million tons of unused quota accumulated between 2020 and 2023, but only for smelters linked to industrial parks and downstream investment projects, he said.

In addition, FINI has submitted an alternative nickel ore benchmark pricing formula to the government that it says would better balance the economic interests of upstream miners and downstream processors.

Ditya said BNI would continue supporting the government's industrialization and downstream-processing agenda while remaining selective in financing projects that could become vulnerable under low-margin or supply-constrained conditions.

She said the bank prioritizes clients with upstream mining assets because they are less exposed to feedstock shortages. For borrowers without upstream operations, BNI requires long-term supply agreements with ore suppliers.

BNI is also encouraging borrowers to pursue decarbonization and energy-transition initiatives as part of its broader risk management framework, she said.

Ali Safdar, Managing Director and Partner at Boston Consulting Group, said investors should avoid making a single large directional bet on the nickel market and instead evaluate assets based on ore access, processing margins and policy flexibility.

Investors that assess those factors separately, rather than treating them as a single risk, may be better positioned to navigate an increasingly uncertain policy and market environment, he said.

Editing by Reiner Simanjuntak