Supply: The Indonesian Overhang
Indonesia now accounts for ~60% of global nickel output through low-cost NPI and expanding HPAL capacity. The government announced a 2026 ore production target of 250–260Mt (flat-to-down vs 2025) to support prices, but market skepticism persists. LME inventories at ~287,550t (+44% YoY) reflect the ongoing surplus.
The key structural feature is a split market: an abundance of low-grade class-2 (NPI, ferronickel) versus tightening high-purity class-1 nickel and battery intermediates. Sulfur shortages at HPAL plants and stricter mining quotas (RKAB) are constraining battery-grade supply even as NPI remains plentiful.
[FACT] LME nickel inventories stand at 287,550t, up 44% YoY. [ESTIMATE] The effective class-1 deficit could reach 50–100kt if Indonesian quota enforcement tightens further.
Demand: Stainless Floor, EV Growth
Stainless steel accounts for ~60–70% of nickel demand. Global stainless output growth is sluggish in 2026, capped by weak Chinese construction and slower global manufacturing. This provides a soft floor but not a catalyst for price spikes.
EV battery demand is the growth engine, expanding at ~20% annually. However, rapid adoption of nickel-free LFP chemistries (especially in China) structurally limits the upside for nickel demand from batteries. Battery-grade nickel sulphate pricing remains closely linked to class-1 availability and HPAL output.
[FACT] Stainless demand accounts for ~70% of nickel consumption. [ESTIMATE] EV battery nickel demand growing ~20% annually, partially offset by LFP substitution.
Price Scenarios
Base Case ($15,000–18,000/t): Surplus overhang keeps a ceiling on prices. ING forecasts average $15,250/t for 2026. Occasional rallies above $18,000 on Indonesian policy headlines. Probability: ~55%.
Bull Case ($18,000–22,000/t): Credible Indonesian supply discipline, HPAL disruptions, and stronger stainless demand. Crux Investor sees $20,000+ in the near term. Probability: ~25%.
Shock Case ($22,000–25,000/t): Aggressive Indonesian quota enforcement compounds with sulfur shortages and class-1 deficit. Probability: ~20%.
Decision Matrix
| Action | Role | Timeline |
|---|---|---|
| Separate class-1 from class-2 nickel procurement strategies | Procurement | Immediate |
| Lock battery-grade nickel sulphate supply through H2 2026 | Supply Chain | Q3 2026 |
| Monitor Indonesian RKAB quota approvals monthly | Market Intel | Monthly |
| Model $15,000–20,000/t nickel range with upside scenario | CFO | June 2026 |
| Evaluate LME hedging for stainless-linked nickel exposure | Treasury | Q3 2026 |
Buyers must manage the nickel market as two separate commodities. Class-1 nickel and battery-grade intermediates face tightening supply dynamics and may see significant price premiums over LME. Stainless-grade nickel (NPI-based) remains in surplus. Procurement strategies should split by grade: secure battery-grade supply early, shop competitively for NPI-linked material, and budget for episodic LME spikes of $3,000–5,000/t on Indonesian policy headlines.