Few commodity markets in 2026 present as stark a contradiction as nickel. On one side, Indonesia's aggressive quota tightening has propelled LME nickel from $14,400 per tonne in December 2025 to above $19,000 per tonne by May — a rally of more than 30%. On the other, LME inventories stand at 287,550 tonnes (up 44.2% year-on-year), the global market remains in surplus, and ING forecasts an average price of just $15,250 per tonne for the full year 2026. The tension between these two realities defines the nickel market today.
The bull case: Indonesia rewrites the supply playbook
The bullish narrative is straightforward and powerful. Indonesia, which controls more than 60% of global nickel supply, has pivoted from volume growth to active supply management. The 2026 RKAB quota cut — a one-third reduction to approximately 250–270 million wet metric tonnes — has created genuine ore scarcity for domestic smelters. NPI production has been curtailed since March and April as high-grade saprolite ore becomes harder to source. Eramet announced a production halt. The Weda Bay mine faces a May shutdown as its quota exhausts.
These are not theoretical supply risks — they are material disruptions that have already removed thousands of tonnes of nickel from monthly production schedules.
Macquarie analysts see upside risk if quotas remain tight through the second half of the year. The INSG has already revised its 2026 global balance from a 261,000-tonne surplus to a 32,000-tonne deficit — a swing of nearly 300,000 tonnes driven almost entirely by Indonesian policy. The revised HPM (Harga Patokan Mineral) benchmark pricing formula, effective April 15, 2026, has structurally raised the cost floor for domestic ore sales, adding further support to refined nickel prices.
"Since the end of 2025, Indonesian government policies are bringing about a major change in the supply/demand and pricing dynamics of the nickel market." — Jim Lennon, Macquarie
The bear case: Inventory overhang and demand-side headwinds
Yet for every bullish argument, there is a powerful counterweight. The most immediate is inventory. LME registered and off-warrant stocks combined reached more than 367,000 tonnes in 2025, and while some drawdown has occurred, 287,550 tonnes of visible inventory provides a substantial buffer. Much of this material sits in Singapore and Kaohsiung, ready to be delivered against any genuine physical tightness.
ING's outlook captures the disconnect well: the bank sees a 261,000-tonne surplus and a $15,250 per tonne average for 2026 — a full $3,600 below current spot levels. At $18,880 per tonne, the market is pricing in a supply scarcity that has not yet fully materialized in physical balances.
Demand-side risks compound the picture. Stainless steel, which accounts for 60–70% of global nickel consumption, faces tepid growth amid weak global industrial activity. Battery demand — the growth story that drove nickel investment for years — is being crimped by the rapid structural shift toward lithium iron phosphate (LFP) chemistry, which uses no nickel at all.
Nickel Market: Bull vs Bear Scorecard
- LME Inventories287,550 t (+44.2% YoY)
- ING 2026 Surplus Forecast261,000 t
- INSG Revised 2026 Balance32,000 t deficit
- ING 2026 Avg Price Forecast$15,250/t
- Current Spot vs Forecast$3,630/t premium
- 2025 Total Surplus (INSG)283,000 t
- Price Rally Since Dec 2025~+31%
Two-way risks dominate the outlook
The nickel market in mid-2026 is a study in competing forces. The most probable near-term scenario sees prices range-bound between $16,750 and $18,750 per tonne, with the lower end defended by Indonesian supply discipline and the upper end capped by inventory overhang and substitution risk.
↑ Bullish Scenario
Indonesia maintains quota discipline through H2 2026 without supplementary allocations. Philippine monsoon disruption compounds supply tightness. LME inventories draw below 200,000t. Price target: $22,000–$25,000/t.
↓ Bearish Scenario
Indonesia issues supplemental RKAB quotas under smelter pressure. LFP adoption accelerates, cutting battery nickel demand. LME surplus material floods the market. Price target: $14,000–$16,000/t.
The wildcard is the H2 RKAB revision cycle. Indonesia's government has allowed companies to apply for revised quotas in the second half of 2026, opening the door for additional supply. If regulators, facing pressure from domestic smelters operating at 70–75% utilization rates, raise the national quota back above 300 million tonnes, the scarcity narrative could evaporate quickly. Chinese companies operating in Indonesia have already warned that tighter quotas, higher taxes, and the new pricing formula are threatening investment viability.
Where prices go from here
For investors and traders, nickel in 2026 offers a classic policy-driven trade. The Indonesian government has effectively established itself as the swing producer, and its decisions — not mine economics or demand growth — will determine price direction. The market is pricing in continued discipline, reflected in the persistent premium of spot over forward curves. But the 287,550 tonnes sitting in LME warehouses serve as a constant reminder that physical balances have not yet tightened to the degree that prices suggest.
ING's $15,250 per tonne forecast may prove too conservative if quota discipline holds, but the current $18,880 per tonne level also appears vulnerable to any sign of policy loosening. The most dangerous position in nickel right now may be one that assumes the current price is anchored to fundamentals either way.