Indonesia’s nickel industry is beginning to feel the impact of tighter raw material supplies after the government moved to curb nickel ore production, forcing many smelters to reduce operating rates and scale back output.

Nickel prices reflected some of the changing market dynamics, with spot nickel falling 2.3% to $18,300 per ton as of 15:26 GMT.

Indonesia’s Energy Ministry reduced the country’s 2026 nickel ore production quota to between 260 million and 270 million metric tons, down from 320 million tons produced last year. The new target is also well below industry demand estimates of 340 million to 350 million tons for the current year.

The production cuts were introduced after years of oversupply that weighed heavily on global nickel prices.

Smelter utilization declines

According to Indonesia’s nickel industry association, utilization rates at rotary kiln electric furnace (RKEF) nickel smelters have fallen to 76%, compared with 84% a year ago.

Arif B. Kusuma, chairman of the industry group, said during Indonesia’s Critical Minerals Conference on Friday that several production lines in South Sulawesi and Central Sulawesi have reduced output to less than 50% of capacity.

He explained that operators are maintaining minimum production levels to avoid shutting furnaces down completely, since restarting idle furnaces is expensive and can take several months.

Government seeks to prevent another supply glut

Septian Hario Seto, a member of Indonesia’s National Economic Council, said production controls had become necessary after years of oversupply created significant pressure on nickel prices.

“If we do not control production, I believe we will see the largest surplus in nickel market history in 2026,” Seto said.

Nickel prices on the London Metal Exchange climbed to $20,000 per ton on May 6, their highest level since May 2024, as investors grew concerned about potential supply shortages from Indonesia, the world’s largest nickel producer.

Seto stated that a price range between $18,000 and $20,000 per ton represents the “ideal level” for Indonesia.

“We would like to see prices remain within this range, but we certainly do not expect nickel prices to rise significantly above $20,000 per ton because that would create problems for end users,” he said.

Major producer exhausts quota

Meanwhile, PT Weda Bay Nickel, the Indonesian operation partly owned by the French mining company Eramet, has suspended nickel ore production after exhausting its mining quota at the end of May.

The company plans to apply for an additional production allocation as it seeks to resume operations.

The developments highlight Indonesia’s increasingly active role in managing global nickel supply, as policymakers attempt to balance producer profitability against the risk of another prolonged period of oversupply in the market.

Canada’s labor market delivered a surprisingly strong performance in May, with employment rising sharply and the unemployment rate declining, suggesting the economy remains more resilient than many economists had anticipated despite slowing growth.

Data released on Friday showed the Canadian economy added 87,800 jobs in May, while the unemployment rate fell to 6.6%.

The result was significantly stronger than market expectations. Economists surveyed by Reuters had expected unemployment to remain unchanged at 6.9%, the highest level in six months recorded in April, while forecasting a gain of only 10,000 jobs.

May marked the first monthly increase in employment in 2026 and helped recover roughly 80% of the jobs lost since the beginning of the year, according to Statistics Canada.

The last major employment gain had been recorded in October 2025.

Resilience despite economic slowdown

For more than a year, the Canadian economy has faced pressure from US tariffs and ongoing trade uncertainty, which have weighed heavily on key sectors, contributed to job losses, and weakened hiring and investment activity across the broader economy.

Canada entered a technical recession at the end of the first quarter after recording two consecutive quarters of economic contraction on an annualized basis.

However, economists remain divided on whether the country is experiencing a true recession, given the absence of widespread job losses and continued growth in several sectors.

Statistics Canada reported that the construction sector added 26,800 jobs in May, while the information, culture, and recreation sector gained 19,300 positions.

Employment in transportation and warehousing increased by 18,700 jobs, while accommodation and food services added 17,000 positions.

In contrast, the wholesale and retail trade sector, which accounts for roughly 14% of total employment, lost approximately 35,000 jobs.

Jay Zhao-Murray, Chief Economist at Sibley Creek Economic Research, said the report provides encouraging evidence that the Canadian economy has not slipped into a deeper downturn.

“These are positive developments for the Canadian economy and should help dispel the notion that Canada has entered a recession,” Zhao-Murray said.

He added that the labor market continues to show underlying strength, potentially giving the Bank of Canada room to leave interest rates unchanged at next week’s policy meeting.

Growth concentrated in full-time employment

Economists also noted that preparations for the upcoming FIFA World Cup, which Canada will partially host, could provide additional support to employment in certain sectors during June and July.

Virtually all of May’s employment growth came from full-time jobs, which increased by 154,000 positions and nearly offset most of the losses recorded during the first four months of the year.

Meanwhile, part-time employment declined by 66,200 jobs.

Average hourly wages for permanent employees, a key measure closely monitored by the Bank of Canada as an indicator of inflation pressures, slowed to 3.2% year-over-year in May from 4.8% in April.

Youth unemployment also improved, falling by 0.9 percentage points to 13.4%, marking its first decline since January.

Market reaction

Following the release of the report, the Canadian dollar strengthened 0.12% to 1.3889 Canadian dollars per US dollar, equivalent to about $0.72 US.

Canadian two-year government bond yields rose 9.5 basis points to 2.762%.

Markets also increased expectations for future policy tightening, fully pricing in a 25-basis-point Bank of Canada rate hike by the end of the year, with December currently viewed as the most likely timing for such a move.

The US labor market delivered another strong performance in May, as job growth accelerated unexpectedly, highlighting the resilience of the economy despite elevated energy prices and persistent inflation pressures.

According to the US Bureau of Labor Statistics report released on Friday, nonfarm payrolls increased by 172,000 jobs on a seasonally adjusted basis. That followed a revised gain of 179,000 jobs in April and significantly exceeded economists’ expectations for an increase of just 80,000 jobs.

Meanwhile, the unemployment rate held steady at 4.3%, in line with market forecasts.

Gus Faucher, Chief Economist at PNC, said the labor market is currently stronger than it was a year ago and remains remarkably resilient despite higher energy costs and broader inflationary pressures.

“There are no signs that the labor market needs support,” Faucher said.

Broad-based hiring gains

May’s report showed a broader expansion in hiring across several sectors.

The leisure and hospitality sector led job creation, adding 70,000 positions, far above its average monthly gain of 14,000 over the past year.

Local governments added 55,000 jobs, while the healthcare sector—one of the primary drivers of employment growth in recent years—contributed 35,000 new positions, roughly in line with its long-term average.

The social assistance sector added another 12,000 jobs.

Average hourly earnings increased 0.3% during the month and rose 3.4% from a year earlier, matching market expectations.

A stronger labor market picture

The report comes after a period of relatively modest expectations, as companies adopted a cautious hiring strategy characterized by lower rates of both hiring and layoffs.

Although job gains remain concentrated in a limited number of sectors, layoffs have stayed relatively subdued despite growing concerns about the impact of artificial intelligence on employment.

Revisions to prior months also painted a stronger picture of the labor market. April payrolls were revised upward by 64,000 jobs, while March payrolls were increased by 29,000 to 214,000 jobs.

US President Donald Trump dismissed the Commissioner of the Bureau of Labor Statistics last summer following weak employment data and substantial downward revisions, later appointing William Jay Wiatrowski as the agency’s acting head.

Heather Long, Chief Economist at Navy Federal Credit Union, described the report as a clear sign that the hiring slowdown has ended.

“American companies are hiring again,” Long said. “This is a strong jobs report from every angle.”

Market reaction

Following the release of the data, US Treasury yields rose sharply while US stock futures generally moved lower.

The household survey, which is used to calculate the unemployment rate, also showed positive developments, with the number of employed individuals increasing by 149,000.

The labor force participation rate remained unchanged at 61.8%, while the broader unemployment measure—which includes discouraged workers and those working part-time for economic reasons—declined to 8.1%.

Implications for Federal Reserve policy

The stronger-than-expected employment data is likely to reduce expectations for near-term Federal Reserve rate cuts.

Ellen Zentner, Chief Economic Strategist at Morgan Stanley Wealth Management, said robust labor market conditions keep the Federal Reserve firmly in a wait-and-see mode, with inflation now taking center stage.

“Rate cuts remain unlikely in the near term,” Zentner said. “However, the absence of inflationary pressure in today’s report may cool some of the recent discussion about potential rate hikes.”

In recent weeks, Federal Reserve officials have become increasingly comfortable with labor market conditions and have shifted their attention toward persistent inflation concerns, which have reduced the likelihood of additional rate cuts.

The Federal Reserve lowered interest rates by 0.75 percentage points during the second half of 2025 before moving to a policy of holding rates steady this year while waiting for greater clarity on the economic outlook.

The broader US economy also remains resilient. Gross domestic product expanded at an annualized rate of 1.6% in the first quarter, while estimates from the Atlanta Fed currently point to growth of around 3% in the second quarter.

Oil prices were little changed on Friday after Oman confirmed that operations at Mina Al Fahal were proceeding normally, following reports of disruptions caused by an explosion near the port.

Petroleum Development Oman said port operations had not been affected after Reuters cited three sources saying that oil loading activities had been halted following an explosion near the shipping berths.

Oman exports between 800,000 and 900,000 barrels of crude oil per day through the port.

Brent crude futures rose 6 cents, or 0.06%, to $95.09 per barrel by 11:21 GMT, after closing 2.84% lower on Thursday.

US West Texas Intermediate crude gained 15 cents, or 0.16%, to $93.19 per barrel, following a 3.1% decline in the previous session.

Despite the recent pullback, both benchmarks remain on track for their first weekly gains in three weeks, with Brent up about 4.2% and WTI advancing roughly 6.7%.

Prices have been supported by escalating fighting in the Middle East and the continued lack of progress in peace talks between the United States and Iran, while shipping traffic through the Strait of Hormuz remains restricted. Roughly one-fifth of global oil supplies normally pass through the strategic waterway.

Analysts at Commerzbank said Brent crude and European natural gas prices rose modestly this week after hopes for a breakthrough between Washington and Tehran faded once again.

However, the bank noted that Brent’s gains remain limited due to higher-than-expected oil inventories, rerouted export flows, and weak global demand.

Meanwhile, Hezbollah Secretary-General Naim Qassem rejected a US-brokered agreement between Israel and the Lebanese government on Thursday aimed at ending hostilities. Iran has also made a ceasefire in Lebanon a condition for any peace agreement with Washington.

US President Donald Trump said he believes progress is being made between Israel and Lebanon, adding that Lebanon “deserves peace.”

Tony Sycamore, market analyst at IG, said any optimism remains clouded by a constant stream of conflicting headlines and statements.

At the same time, OPEC maintained its forecast for global oil demand growth of 1.2 million barrels per day this year despite the Middle East conflict and the closure of the Strait of Hormuz, according to Secretary General Haitham Al Ghais.

Shipping data also showed that Iranian oil exports have fallen to their lowest level in six years, primarily due to the US naval blockade, although weaker Chinese demand has also weighed on prices for Iranian crude.