LME nickel cash held steady at $19,170/mt with three-month at $19,350/mt, reflecting a mild backwardation of $180/mt. The market remains supported by Indonesia's ongoing ore quota restrictions, which have reduced nickel ore availability for the country's massive NPI and matte production facilities.
Indonesia's Ministry of Energy and Mineral Resources has maintained strict ore quota allocations, limiting total approved volumes to approximately 60% of 2025 levels. The policy aims to extend the life of Indonesia's nickel reserves and encourage domestic processing investment.
The quota cuts have had a direct impact on nickel pig iron production. Several small-to-medium NPI smelters in Indonesia have reduced output, with overall NPI production declining by an estimated 15% quarter-on-quarter in Q2 2026. This has tightened the Class 2 nickel market significantly.
On the Class 1 side, LME inventories remain at approximately 68,000 tonnes, down from 90,000 tonnes at the start of 2026. The drawdown reflects sustained demand from the stainless steel sector and limited availability of high-purity nickel suitable for LME delivery.
The nickel market outlook remains constructive for H2 2026, with Indonesia's ore policy the key variable. Any further quota reductions would tighten the market further, while a relaxation would pressure prices.
Indonesia's quota policy is the dominant price driver. Watch for any policy announcements around ore quota allocations for H2 2026. A relaxation would signal near-term downside. For now, maintain 3-6 month forward coverage at current levels.