Nickel Industries Ltd. halted the ramp-up of its Excelsior Nickel Cobalt facility in Sulawesi due to water shortages linked to an El Niño drought, the Sydney-listed company said Tuesday. The plant will operate at 30% of nameplate capacity while constraints persist. Other Nickel Industries plants remain unaffected.

Indonesia, the world's top nickel producer accounting for about 60% of global supply, is facing a severe drought that has worsened forest fires and haze across Southeast Asia. The Indonesia Morowali Industrial Park (IMIP), where most of Nickel Industries' operations are sited, earlier warned overall output could be cut by 30% to 40% without new water sources. Producers at IMIP also face high sulfur costs, a key reagent for high-pressure acid leaching plants like Excelsior Nickel Cobalt.

Rainfall at the company's Hengjaya mine near IMIP totaled less than 4 millimeters last month versus a historical average of 222 millimeters.