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(Bloomberg) — One of the biggest nickel smelters in Indonesia has slashed production and is close to shutting down completely, just months after the collapse of its Chinese parent company.

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PT Gunbuster Nickel Industry, which is affiliated with bankrupted stainless steel giant Jiangsu Delong Nickel Industry Co., is delaying payments to local energy suppliers and is unable to procure nickel ore, according to people familiar with the situation. The smelter will likely halt production soon if the situation persists, said the people, who asked not to be named as the matter is sensitive.

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Gunbuster didn’t reply to an email seeking comment. 

Global nickel prices have almost halved since the end of 2022 as booming Indonesian production forced mines and plants elsewhere to shutdown. But now even smelters in the Southeast Asian country — which typically benefit from lower energy and labor costs — are feeling the pinch. Supplies of ore in the country have also been tight for almost a year due to a lack of mining quotas issued by the government.

That’s worsened the predicament of Gunbuster, which was already suffering from the collapse of its parent Delong. The Chinese conglomerate — owned by Dai Guofang and his family — was one of the earliest investors in Indonesia’s nickel smelting industry, but was forced into restructuring by a Chinese court last year. Its businesses have suffered from China’s economic slowdown and fierce competition from Tsingshan Holding Group, which also has huge operations in Indonesia.

Delong, Xiangshui county government and law firm King & Wood Mallesons, who was appointed as judicial manager for the restructuring, couldn’t immediately comment on the matter.

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Gunbuster, which is able to produce 1.8 million tons of nickel pig iron a year, has already shut all but a few of its more than 20 production lines since the start of the year, the people said. A working group of Chinese government officials and lawyers appointed by the court in Xiangshui County, Jiangsu province, has taken over the firm as part of Delong’s restructuring process, two of the people familiar with the matter said.

Then-Indonesian President Joko Widodo, who was instrumental in luring more foreign investment to the archipelago’s nickel industry, attended the inauguration of the smelter in 2021. Gunbuster said at the time that it planned to invest $3 billion in the plant. Its massive scale made it one of the few rivals of Tsingshan Holding Group in the country, whose smelters are largely concentrated in large purpose-built industrial parks.

—With assistance from Annie Lee.

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