Nickel has recovered from a 14% June correction to trade near $17,372/t as of July 27, driven by Indonesia's decision to maintain strict mining quotas. On July 10, Indonesia's Ministry of Energy and Mineral Resources (ESDM) clarified it would NOT implement a broad increase in nickel ore quotas, with only smelters facing acute ore shortages receiving limited additional volumes.
This clarification established a floor under prices, reversing the panic that drove nickel from May highs near $19,350/t to June lows of $16,395/t. The earlier correction was triggered by rumors that Indonesia might expand its 2026 mining limit to 360 million tonnes from its current ~250-260Mt target.
But the upside remains capped by record inventories. Combined LME and SHFE stocks hit a historic peak of 468,600t in mid-2026, with LME registered stocks at approximately 274,000t — highly liquid compared to the extreme drawdowns of 2024-25. Chinese social stocks add another 128,000t. This inventory overhang means any supply-driven rally will attract metal back into the exchange system.
Demand is the other headwind. Stainless steel accounts for roughly 64% of nickel consumption, and Chinese stainless output from 43 major mills fell 7.88% month-on-month in June to 3.515Mt. Stainless buyers are purchasing hand-to-mouth, and nickel sulfate purchases remain cautious amid slowing growth in nickel-based battery demand as LFP chemistry gains share.
Supply-side support also comes from sulfur shortages. The Gulf crisis and China's export halt on sulfuric acid have inflated production costs at Indonesian HPAL facilities, tightening the cost floor even as inventories are high. This structural cost support is a key reason analysts see limited downside despite the surplus.
The bull case: Indonesia's quota discipline is real and sustainable, sulfur costs provide a rising floor, and medium-term EV demand (growing ~20% annually) will eventually absorb surplus inventories. S&P Global sees the market flipping to deficit by 2031. The bear case: record inventories can't be ignored, stainless demand is genuinely soft, and LFP chemistry means battery nickel demand growth will disappoint. The base case: $16,000-$18,000 range through H2 2026, with bias toward the upper end if Indonesia maintains quota discipline.
For procurement teams managing stainless steel costs, nickel surcharges deserve scrutiny. The market is in fundamental surplus with record inventories — blanket surcharge demands from mills are not justified by current fundamentals. Lock essential quantities for July-August needs at current levels, but maintain flexibility for H2. The Indonesia quota story is the key variable: if Jakarta maintains discipline, nickel has a floor near $16,500. If quotas expand, $15,000 is in play. Watch LME warrant data weekly — a sustained drawdown from 274,000t would signal the surplus is finally being absorbed. For battery-grade nickel sulfate, the sulfur cost story makes HPAL production economics fragile, so secure term contracts with price adjustment mechanisms.