Nickel Struggles at $16,655 After 14% June Crash as Indonesia Signals Quota Reversal

Nickel is the base metal that fell back to earth. After surging to $19,600/mt in early May on Indonesian supply fears and EV demand optimism, LME nickel has shed 14% in six weeks to trade at $16,655/mt — effectively erasing most of 2026's gains and settling within 10% of where it started the year. The trigger for the collapse was a familiar one: Indonesia. The country that produces 60% of the world's nickel has signaled a dramatic policy reversal, with the Energy and Mineral Resources Ministry privately indicating plans to raise total 2026 mining quotas (RKABs) to 360 million tonnes from the 260 million tonnes issued in the first half of the year.

The psychology of this reversal cannot be overstated. In January, when Indonesia announced a quota cut from 379 million tonnes (2025 actual) to roughly 250 million tonnes for 2026, nickel prices jumped 18% in six weeks on fears of a structural supply crunch. The narrative was simple: Indonesia was finally constraining the runaway supply growth that had crushed nickel prices throughout 2023–2025. Analysts at Macquarie, Benchmark Mineral Intelligence, and CRU all raised their price forecasts. Now, that narrative has been unwound — and the market is repricing accordingly.

The details matter. The 360-million-tonne figure is not yet official; it has been communicated through private channels to industry participants but has not appeared in any published government regulation. Several Jakarta-based analysts note that the Indonesian government has a pattern of signaling production increases to calm markets, only to moderate the final figure. The actual quota may land closer to 300–320 million tonnes — still a significant increase from the H1 level of 260 million tonnes but not a return to 2025's 379 million tonnes. Even at 320 million tonnes, the system would add roughly 60 million tonnes of nickel ore supply versus the H1 run-rate, equivalent to approximately 600,000–700,000 tonnes of nickel in ore — enough to tip the global market from deficit to surplus.

The bearish case is reinforced by two additional supply-side developments. First, Nickel Industries — one of Indonesia's largest nickel producers — has announced plans to ramp up production at its new Excelsior Nickel Cobalt HPAL (high-pressure acid leach) plant while expanding downstream processing capacity through additional HPAL investments. The Excelsior plant alone will add roughly 72,000 tonnes of nickel equivalent capacity when fully operational, expected by Q4 2026. Second, China's Tsingshan Group — the world's largest stainless steel and nickel producer — continues to expand its Indonesian operations, with its Weda Bay complex now producing at an annualized rate of 400,000+ tonnes of nickel in various forms.

On the demand side, the picture is more supportive but insufficient to offset the supply deluge. Global electric vehicle sales rose 28% year-over-year in H1 2026, according to Rho Motion, with China leading at +32%. The average EV battery now contains 39 kg of nickel (up from 32 kg in 2023) as automakers shift toward higher-nickel NMC 811 and NCMA chemistries for premium vehicles. Stainless steel production — which still consumes roughly 65% of global nickel — grew 2.8% year-over-year through May, with Indonesian stainless output up 8% and Chinese output flat. The net effect: nickel demand growth is running at roughly 5–6% annually, which is healthy by historical standards but nowhere near enough to absorb the 10–12% annual supply growth that the expanded Indonesian quota would enable.

Inventory data confirms the oversupply. LME nickel stocks stand at approximately 104,000 tonnes, up from 45,000 tonnes in January 2025 and the highest since mid-2022. SHFE nickel inventories are similarly bloated at roughly 35,000 tonnes. Combined exchange stocks of ~139,000 tonnes represent roughly 5.5 weeks of global consumption — comfortable by any measure. The days of nickel backwardation and physical premiums are a distant memory; LME nickel is in contango out to 15 months, with the cash-to-three-month spread at roughly -$45/mt, indicating ample prompt availability.

Analyst views reflect the bearish supply reality. Trading Economics models forecast nickel at $16,540 by end of Q3 2026 and $17,582 in 12 months — essentially a sideways grind. CRU Group sees downside risk to $15,500/mt if the Indonesian quota is finalized at 360 million tonnes. ChAI, the AI-driven commodity forecasting platform, assigns a 65% probability to nickel trading below $16,000/mt by September. Bullish voices exist — Benchmark Mineral Intelligence maintains that the long-term EV demand trajectory will absorb Indonesian supply by 2028 — but for 2026, the consensus is bearish.