LME nickel prices have stabilized above $17,000 per tonne, trading at $17,450 as of early June, recovering from multi-year lows below $14,000 in early 2025. The primary catalyst for the recovery is Indonesia's dramatic reduction in its nickel ore mining quota (RKAB) for 2026, set at 250-260 million wet metric tonnes, down from 379 million wmt in 2025 — a reduction of approximately 34%. Following the announcement, LME nickel prices surged past $18,000/t before settling into the current range.
The quota reduction has created a bifurcated market. While LME refined nickel inventories remain elevated at approximately 250,000 tonnes — reflecting the massive surplus of Class 2 nickel (NPI) built up during Indonesia's 2020-2024 production expansion — the ore scarcity is now transmitting through to refined metal pricing. Nickel pig iron (NPI) producers face rising costs as the ore floor price (HPM) has been raised, increasing production costs by an estimated $500 per tonne of nickel contained. The least efficient RKEF smelters may face curtailments if margins continue to compress.
The ore-grade decline compounds the quota constraint. Saprolite ore grades in Indonesia, used for NPI and matte production representing half of global supply, have declined by double-digit percentages year-on-year. This means that even at the reduced quota, the actual nickel content recovered may be lower than expected, further tightening effective supply. Vale Indonesia has warned that its approved 2026 quota meets only 30% of what the company requested, raising concerns that upcoming HPAL plants may face ore shortages.
The nickel market is transitioning from a surplus-driven bear to an ore-driven bull. Buyers should monitor the interplay between refined stock levels and ore availability. For battery-grade nickel, the tightness is more acute than LME prices suggest. Consider premium contracts that guarantee access to Class 1 material.