BEIJING/JAKARTA - Prices of nickel ore in top global producer Indonesia have surged about 10% in recent weeks, say local buyers, after an investigation into mining quotas disrupted production of the metal used in stainless steel and batteries.

Indonesia's Attorney General Office (AGO) in June launched a probe into illegal mining, leading to the arrest of a top government official earlier this month and the suspension of operations at a key mining site owned by state miner Aneka Tambang (Antam).

Jakarta has also halted issuing new mining quotas for nickel miners, according to a manager at an Indonesia-based smelter and a report by Chinese consultancy Mysteel.

The Energy and Mineral Resources Ministry did not respond to Reuters requests for confirmation.

Dozens of nickel smelters in the country are now rushing to stock up on ore, pushing up prices of the material, according to a smelter manager, a nickel trader and Mysteel.

"Smelters are scrambling for ore, with fears of not enough supply especially after big buyers lifted prices," said the manager at a Chinese-owned smelter who declined to be identified as he is not authorised to speak to media.

"Many smelters don't have much nickel ore stocks, and if the situation continues, we might see some stop production," he added.

Some smelters are raising offers for ore by as much as 15%, said a Chinese trader which buys nickel pig iron from Indonesia.

The suspension of new mining quota could reduce ore supply in the country by 30% during the August-December period, said MySteel.

Antam is keeping its 2023 production target at 11.3-million metric tons of wet ore, the company's corporate secretary Syarief Faizal Alkadrie told Reuters, despite the suspension of operations at its Mandiodo block.

Indonesia produced 1.61-million metric tons of nickel ore in 2022, half of the world's total, data from World Bureau of Metal Statistics showed.

Most of the ore is smelted into nickel pig iron, which is partly consumed locally to make stainless steel and partly exported to China for further processing.

The higher cost of ore has pushed up nickel pig iron prices to 1 175 yuan ($161.22) per nickel unit on Wednesday, up 10% from a month earlier and the highest since March, according to MySteel.

Export prices stood at $139 per nickel unit, the highest in more than two months, it said.

China, the world's top nickel consumer, imported 4.29-million tons of nickel pig iron in the first seven months this year, with 93% of shipments from Indonesia, Chinese customs data showed.

Prices of nickel pig iron in China's eastern Jiangsu province reached 1 165 yuan per nickel unit on Wednesday, up 10% from a month earlier and the highest since March, according to Mysteel.

The situation in Indonesia is also pushing up nickel ore prices in the Philippines, according to Dante Bravo, the president of Global Ferronickel Holdings, one of the country's biggest nickel ore producer