Indonesia's November 2025 decision to ban new HPAL (high-pressure acid leach) and NPI (nickel pig iron) processing plants marks a strategic pivot from volume-driven production to value-added processing. Only downstream facilities that produce higher-grade nickel products will be approved going forward. This policy shift, combined with the ore quota reduction, signals Jakarta's intent to capture more value from its nickel resources while managing the environmental and social costs of mining.
Global EV sales rose 21% year-on-year in 2026, with particularly strong growth in Europe and North America, where battery supply chain localization policies are driving demand for Class 1 nickel. Despite the bullish demand picture, ING forecasts the global nickel market will remain in surplus at 261,000 tonnes in 2026, following a 209,000 tonne surplus in 2025. The surplus is concentrated in Class 2 nickel (NPI), while battery-grade Class 1 nickel and nickel sulfate markets are significantly tighter.
The supply-demand bifurcation creates strategic opportunities and risks. Canada Nickel's Crawford project, designated as a National-Building Project by Prime Minister Carney, has secured federal financing for construction targeted at year-end 2026. The project represents one of the few Western sources of Class 1 nickel outside of the Indonesian supply chain. Meanwhile, the sulfur shortage affecting Indonesian HPAL operations threatens battery-grade production, as sulfuric acid is essential for the leaching process. This could create a premium for non-Indonesian Class 1 material.
The Indonesia policy shift creates bifurcated risk: NPI buyers face ore-cost pressure, while battery-grade buyers face HPAL feedstock uncertainty. Western nickel projects offer supply security at a premium. Evaluate portfolio diversification to reduce Indonesia concentration risk.