Nickel on the London Metal Exchange traded at $16,655 per metric tonne on July 10, up 0.30% from the previous session but near six-month lows. The metal has shed 6.41% in the past month and is trading roughly 15% below the early-May peak of $19,600 that briefly rekindled hopes of a sustained recovery. LME warehouse stocks stood at 274,584 tonnes on July 12 — essentially flat — while combined LME-SHFE inventories are estimated above 468,000 tonnes, the largest visible stock overhang since the aftermath of the March 2022 short squeeze.
The proximate cause of the selloff is Indonesia. The government is considering raising the 2026 RKAB (Rencana Kerja dan Anggaran Biaya) mining quota to approximately 360 million wet metric tonnes, up from the roughly 260 million tonnes allocated earlier in the year. The potential revision would be discussed at the late-July ministry review. If approved, it would add roughly 100 million wmt of nickel ore supply to a market that is already awash in material. Indonesia accounts for approximately 60% of global nickel production — roughly 2.2 million tonnes of contained nickel in 2025 — and the quota determines how much ore can legally be extracted.
The quota politics are complex. Earlier in 2026, the Indonesian government signaled a tighter quota regime, aiming to conserve ore reserves and support prices. The benchmark nickel price briefly rallied above $19,600 in early May as traders priced in supply restraint. But the domestic politics shifted. Indonesian smelters — particularly NPI (nickel pig iron) and matte converters — lobbied for higher quotas, arguing that reduced ore availability would force capacity closures and job losses. The government appears to be listening. Nickel Industries' Excelsior Nickel Cobalt HPAL plant is expanding, and the company is investing in additional downstream processing capacity — all of which requires ore feed.
The inventory picture reinforces the bearish supply narrative. LME nickel stocks at 274,584 tonnes are roughly 6 times higher than the 2022 lows of 46,000 tonnes that preceded the short squeeze. SHFE nickel stocks have also been building. The combined total of 468,000+ tonnes represents roughly 15% of annual global consumption — not a glut by historical standards for industrial metals, but far above the 3-4% ratio seen during the 2022 crisis. Nickel is the only LME base metal where inventory levels are rising rather than falling.
Demand growth is real but insufficient to absorb the supply wave. Stainless steel — roughly 70% of nickel demand — continues to grow at 3-4% annually, with Chinese output recovering in Q2. Battery-grade nickel demand, driven by electric vehicles, is growing at 15-20% annually but from a much smaller base. The problem is that Indonesian NPI and matte supply is growing even faster. The country's integrated nickel industry — mining, smelting, and refining all within Indonesian borders — has a cost advantage that no other producer can match. NPI production costs in Indonesia are estimated at $8,000-10,000 per tonne of contained nickel, well below current LME prices. Even at $16,000, Indonesian producers are profitable. Marginal producers in Australia, New Caledonia, and parts of Africa are not.
Analyst views reflect the supply overhang. PricePedia forecasts an annual average of $16,000 per tonne for 2026, with a modest recovery to $17,000 in 2027 as surplus inventory is gradually absorbed. Trading Economics' consensus models point to $16,956 by the end of Q3 2026 and $18,036 on a 12-month horizon — implying a slow grind higher. The forecast dispersion is narrow: unlike copper or aluminum, where analyst views span thousands of dollars, nickel analysts are clustered within a $1,500 range. The market is not uncertain about the direction — it is bearish — but it is pricing the pace of recovery from an oversupplied base.
The bull case for nickel is a policy reversal from Jakarta. If the late-July ministry review results in a lower quota than the proposed 360 million wmt, or if the government imposes stricter enforcement on illegal mining, the supply narrative shifts quickly. Indonesia seized 500 tonnes of illegal tin in May — the same enforcement appetite applied to nickel ore would remove a significant volume of unofficial supply. The bear case is simply the status quo: Indonesian ore flows freely, HPAL and NPI capacity continues to ramp, and LME stocks keep building. Under that scenario, $15,000 becomes the floor, not $16,000.
The most important variable is the July RKAB review. Traders will parse the exact tonnage figure — not the range — and the enforcement language. If the final quota lands at 320 million wmt or below, the market will interpret it as a partial concession to conservationists and prices could recover to $17,500-$18,000. If it lands at 360 million or above, nickel will test $15,500 within a week.
Nickel buyers are in the strongest negotiating position in three years. LME stocks are ample, Indonesian supply is expanding, and the price is near the lower end of analyst forecasts. This is a buyer's market, and procurement strategy should reflect that. For stainless steel buyers (the largest indirect nickel consumers), negotiate alloy surcharges down: the current LME nickel price of $16,655 is roughly 40% below the 2022 peak of $28,000+ that justified elevated surcharges. Mill margins have expanded on cheaper nickel inputs, and that margin should accrue to the buyer, not the mill. For direct nickel buyers (battery cathode, plating, superalloys), shift from annual fixed contracts to quarterly indexed pricing. In a falling or flat market, annual fixed contracts lock in prices that decline over the year. Index quarterly to LME average plus a premium, with a $15,000 floor to protect the supplier. The floor is cheap insurance at these levels — if nickel falls below $15,000, the global cost curve is severely stressed and supply cuts follow quickly. Watch three triggers: the late-July Indonesian RKAB review (the exact quota number moves markets within hours), weekly LME inventory data (a sustained build above 300,000 tonnes adds further downside pressure), and Chinese stainless steel production data from the NBS (monthly output above 3.5 million tonnes signals demand recovery that could support prices). For 2027 planning, budget nickel at $16,000-17,000/mt — the consensus range — and lock in any dips below $15,500 for strategic inventory.