Indonesia has lowered its 2026 nickel ore production target to 250-260 million tonnes, representing flat-to-down supply compared to 2025. This policy shift, combined with sulfur shortages affecting high-pressure acid leach (HPAL) production, is tightening feed for nickel pig iron (NPI) and mixed hydroxide precipitate (MHP) operations.
The production discipline from Jakarta is a significant departure from the aggressive capacity expansion that characterized 2023-2025. With Indonesia accounting for approximately 60% of global nickel output, even marginal policy adjustments have outsized market impact.
ING forecasts a global nickel surplus of 261 kt in 2026, following 209 kt in 2025, but notes the surplus is concentrated in Chinese and Indonesian-origin cathode flooding LME warehouses. The Class 1 surplus is visible in rising exchange stocks, while Class 2 (NPI) and intermediates face genuine tightness.
Zimbabwe has also imposed nickel export restrictions, adding a further supply constraint. The combination of policy-driven supply discipline and localized disruptions is creating a price floor well above the 2025 lows around $13,865/t.
LME nickel inventories at 274,236 tonnes remain elevated but have stopped rising. The Chinese cathode share of available LME tonnage has risen to 70-75% from 50% at the start of 2025, reflecting the changing geography of global nickel supply.
The Indonesian ore quota policy is the most important variable for nickel pricing in H2 2026. Buyers should secure term contracts with Indonesian suppliers who have confirmed ore allocations. For stainless steel buyers, monitor NPI prices as a more relevant benchmark than LME cathode. For battery-grade nickel, expect tightness in MHP availability to persist.