Nickel is trading in a narrow $18,500-19,250/t band as of June 2026, according to IndexBox data, having recovered from the $13,865/t trough of early 2025 but failing to sustain a breakout above $20,000. The market is caught between two powerful forces: Indonesia's aggressive production restraint, which has tightened ore supply dramatically, and a legacy surplus so large — 283,000 tonnes in 2025, per the INSG — that it acts as a price ceiling even as the flow balance shifts toward deficit. This is the nickel market's central tension in mid-2026.
Indonesia's policy pivot is the biggest supply story in base metals. The government slashed the 2026 nickel ore production quota (RKAB) to 250-260 million wet metric tonnes, down from 379 million in 2025 — a 34% cut. The objective, stated explicitly by Jakarta, is to curb oversupply and support prices. The Indonesian Nickel Miners Association (APNI) has signaled that ore output will not exceed 250-260 million tonnes, creating a potential shortfall of 80-100 million tonnes versus smelter needs, according to the Canadian Mining Report. The government also halted new permits for smelters producing only intermediate products — NPI, ferronickel, matte, MHP — pushing the industry toward higher-value downstream processing.
The INSG's April 2026 outlook marked a dramatic reversal. After projecting a 261,000-tonne surplus for 2026 in earlier forecasts, the group now sees a 32,000-tonne deficit, with primary nickel production at 3.715 million tonnes against consumption of 3.747 million tonnes, as reported by BigMint. This shift is almost entirely driven by Indonesian supply restraint. But the 283,000-tonne surplus from 2025 acts as a buffer — there is metal in the system, in LME warehouses and shadow inventories, that delays any sharp price rally. LME warehouse stocks had been rising through late 2025 as excess feedstock was refined into Class 1 nickel and delivered to the exchange. That trend has now reversed, with stocks beginning to edge lower.
Not all analysts are convinced the deficit is real. ING's commodities strategist Ewa Manthy noted in late 2025 that a surplus of approximately 261,000 tonnes was still the base case, arguing that further cuts would need to be significant to alter fundamentals. SMM, the Chinese research house, projects a primary nickel surplus of 120,000 tonnes in 2026, warning that oversupply will continue to weigh on prices. UBS analysis suggests the market could remain in surplus through 2026 despite upstream restrictions. The divergence reflects genuine uncertainty about how much of Indonesia's quota cut is political signaling versus enforced reality. Eramet has already stated it will apply for a revised quota at its Weda Bay operation after it was cut to 12 million tonnes from 32 million.
A new supply shock emerged in mid-2026: China's sulfuric acid export halt. Indonesia sources approximately three-quarters of its sulfur from the Middle East and now competes for supplies with other sectors. CRU data cited by IndexBox indicates that nickel-related acid demand for battery applications is significant, and the acid constraint directly threatens HPAL operations that produce battery-grade nickel. This is a physical bottleneck — without sulfuric acid, HPAL plants cannot operate regardless of ore availability. It adds a new dimension to supply risk that was not priced into earlier forecasts.
On the demand side, stainless steel remains the dominant consumer at approximately 70% of global nickel use by volume, according to Critical Minerals News. Chinese stainless steel output faces weak real estate conditions and uneven manufacturing demand. Fastmarkets and Wood Mackenzie see demand growth as modest at best. The EV battery story, once the bull case for nickel, has been partially neutralized by the cathode chemistry shift toward LFP (lithium-iron-phosphate) and high-manganese designs, which use no nickel or substantially less. This structural demand headwind limits how high nickel can rally even if supply tightens.
Class 1 nickel — the LME-deliverable refined metal — represents only about a quarter of global primary supply. The rest is Class 2: NPI and ferronickel for stainless steel, which is not LME-deliverable and trades at a discount. The surplus in Class 2 remains structural, tied to Indonesian growth and soft stainless demand, and this exerts a ceiling on Class 1 pricing through substitution and arbitrage. China's refined nickel exports rose 55% year-on-year in the first 10 months of 2025, while Indonesia's nickel cathode exports increased nearly 80%, as excess feedstock was refined and delivered to the exchange.
Nickel buyers face a market where strategic positioning matters more than short-term price timing. The Indonesian quota cuts are real and tightening, but the legacy surplus means you have a window — perhaps 3-6 months — before physical availability genuinely constrains. If you buy Class 1 nickel for electroplating, superalloys, or battery precursors: secure H2 2026 volumes now at the $18,500-19,000/t range while LME stocks still provide a buffer. The sulfuric acid constraint on HPAL operations could create sudden supply gaps for battery-grade nickel — diversify your HPAL/MHP sources across Indonesian, Chinese, and non-Chinese producers. For stainless steel buyers using NPI/ferronickel: the Class 2 market remains structurally oversupplied. You have bargaining power. Negotiate discounts to the LME benchmark. The critical monitor for all nickel buyers is the Indonesian RKAB enforcement: if actual ore production in Q3 tracks below 60 million tonnes per quarter (240Mt annualized), the deficit becomes real and prices will break above $20,000. If enforcement is loose and production exceeds 280Mt, the surplus persists and prices drift back toward $17,000. Contract structures should include a collar at $17,000-22,000/t, weighted 60% fixed and 40% floating.