Nickel Steadies Near $16,700 as Indonesia's Quota Decision Looms and HPAL Supply Builds

Nickel ended the week of July 6-10 at $16,741 per metric tonne, up 1.9% on the week and recovering slightly from the $16,300 six-month low touched in late June. The modest bounce was driven by a weaker US dollar and short-covering rather than any fundamental improvement. The cash-to-three-month spread remains at a deep $196 contango — the widest in the base metals complex — confirming that physical nickel is abundantly available and financiers are being paid to store it.

The market's singular obsession is Indonesia's upcoming mining quota review, expected in late July 2026. The current quota (RKAB) for 2026 was initially set at approximately 250-260 million tonnes of nickel ore, a sharp reduction from the 379 million tonnes produced in 2024. That cut drove nickel from $15,000/mt to above $19,000/mt between December 2025 and February 2026. Now Jakarta is reportedly considering raising the quota to approximately 360 million tonnes — nearly the 2024 level — which would restore surplus conditions and likely push prices back toward $15,000.

The quota calculus is political as much as it is economic. Indonesian President Prabowo Subianto has made downstream processing a centerpiece of his economic policy, and restricting ore exports while expanding domestic smelting capacity has been the mechanism. But domestic smelters are now complaining that ore supply at 260 million tonnes is insufficient — Mysteel estimates total Indonesian nickel ore demand at 320-330 million tonnes for 2026 — and the government faces pressure from domestic processors to increase the quota. The decision will signal whether Jakarta prioritizes price support (lower quota) or downstream processing volume (higher quota).

On the supply side, the HPAL revolution continues to reshape the market. Nickel Industries' Excelsior Nickel Cobalt HPAL plant is ramping up production, adding Class 1 nickel — the grade deliverable against LME contracts — at a pace that was unthinkable five years ago. Indonesia now produces approximately 1.8 million tonnes of nickel annually across all forms, controlling roughly 55% of global mined supply. When you add the Philippines (11%) and New Caledonia (6%), the concentration risk is extreme: three countries account for over 70% of global nickel ore production.

LME inventories remain the market's comfort blanket. Registered stocks at 274,584 tonnes are essentially flat year-to-date, representing roughly 9 weeks of global consumption. SHFE inventories are similarly elevated. Unlike copper, zinc, or aluminum, nickel has no inventory draw story to support prices. Every tonne of HPAL production that comes online adds to the visible supply overhang, and until Indonesian policy either restricts ore supply or global stainless steel and battery demand accelerates meaningfully, the surplus persists.

Demand growth is positive but insufficient to absorb supply. Stainless steel — which accounts for roughly 70% of nickel demand — is growing at 2-3% annually, driven by Chinese and Indian infrastructure spending. Battery demand, the high-growth segment that captured investor imagination in 2021-2022, is expanding at roughly 15% annually but from a base of only about 350,000 tonnes. The battery sector needs to roughly triple in size before it becomes the dominant demand driver, and in the meantime, stainless steel cycles determine nickel's fate. The LFP (lithium-iron-phosphate) battery chemistry shift in China is also reducing nickel intensity per vehicle, a structural headwind the market is still digesting.