LME nickel cash settled at $16,115 per metric tonne on July 3, gaining a modest $45 — the smallest move among the six base metals tracked in this report. SHFE nickel posted a much stronger session, surging ¥2,930 to ¥144,990/mt, up 2.1%. The divergence between LME and SHFE nickel reflects different supply dynamics: Chinese nickel markets are tighter because Indonesian NPI and intermediate products face logistical constraints and import duties that don't affect LME-deliverable Class 1 nickel.
The nickel market in mid-2026 is defined by one fact above all others: Indonesia is producing nickel at a scale that was unimaginable five years ago. The country now accounts for approximately 55% of global nickel production, up from less than 10% in 2019. Its integrated nickel processing complex — rotary kiln electric furnace (RKEF) plants producing nickel pig iron (NPI) and high-pressure acid leach (HPAL) plants producing mixed hydroxide precipitate (MHP) for battery supply chains — has added roughly 500,000 tonnes of annual nickel capacity in the past two years alone. Indonesian NPI output is running at an annualized rate of approximately 1.5 million tonnes of contained nickel in 2026.
This supply surge has permanently altered the nickel market's price structure. Before Indonesia's rise, nickel was a market where supply disruptions — a strike in Sudbury, a policy change in the Philippines, a force majeure in New Caledonia — could send prices above $20,000/t. Now, Indonesia absorbs those disruptions. When other suppliers falter, Indonesian output fills the gap. The result is a new trading range of approximately $16,000-$17,000/t, well below the $18,000+ levels that prevailed before the Indonesian supply wave.
Demand is growing — the misperception would be to think nickel is a market without demand growth. Global stainless steel production, which consumes roughly 70% of nickel, is forecast to reach approximately 62 million tonnes in 2026, up 2-3% year-over-year according to MEPS International. EV battery demand for nickel is growing faster, driven by the shift toward high-nickel cathode chemistries (NMC 811 and NCA) that use 60-80% nickel content in the cathode. Benchmark Mineral Intelligence estimates battery sector nickel demand at approximately 520,000 tonnes in 2026, up 20% year-over-year. Combined stainless and battery demand growth is approximately 6-8% annually.
The problem is supply grows even faster. Indonesian NPI capacity additions alone — approximately 200,000-250,000 tonnes per year of new capacity — exceed total global demand growth. And Indonesia is not the only source. The Philippines has resumed several mines that were suspended under the 2016-2022 mining crackdown. New Caledonia's operations, while politically fragile, continue to produce. This adds up to a market where the surplus — estimated at approximately 150,000-200,000 tonnes in 2026 by various analysts — persists.
SHFE nickel's 2.1% surge on July 3 deserves attention because it may signal a near-term tightening in Chinese markets. Chinese nickel sulfate prices — the form used in battery manufacturing — have been firmer than LME prices, reflecting strong cathode demand and limited import availability of Indonesian MHP due to shipping delays during the monsoon season. If SHFE continues to outperform LME, the import arbitrage window opens, and Chinese buyers start pulling LME inventory into China. That would be a bullish signal — but it would need to be sustained, not a single-session event.
Analyst forecasts remain bearish-to-neutral. The consensus sees LME nickel averaging $16,500-17,500/t for the remainder of 2026, with downside risk to $15,000 if Indonesian capacity additions accelerate or if stainless demand weakens. JP Morgan notes that nickel has shifted to a new trading range of $16,750-$18,750/t, a step up from the $15,000-$16,500 range that prevailed in late 2025, but this reflects cost support from higher Indonesian energy and labor costs more than a fundamental tightening.
Forward catalysts: the Indonesian government continues to signal potential export policy changes — any restriction on NPI exports or tightening of mining quotas would be bullish for LME nickel. Chinese stainless steel mill operating rates in July and August will indicate whether the Q3 seasonal demand pickup is materializing. And the EV battery demand trajectory in H2 2026 matters enormously: if automakers accelerate high-nickel cathode adoption, the demand side of the equation improves significantly.
For stainless steel buyers, negotiate Q3 contracts now at current nickel surcharge levels. The Indonesian supply overhang means nickel is unlikely to spike above $18,000/t in the near term — you have leverage. Structure stainless contracts with a fixed nickel surcharge for Q3 and a floating mechanism for Q4 to capture any post-monsoon supply normalization that could push surcharges lower. For direct nickel buyers (alloy producers, plating operations), the LME price at $16,115 is near the bottom of the new trading range. If you can source Class 1 nickel (LME-deliverable) rather than NPI or ferronickel, you are buying a product that is structurally tighter than the overall nickel market — Class 1 nickel faces its own supply constraints from declining Russian and Canadian output. Build inventory now while LME stocks are rising; if SHFE nickel continues to outperform and the import arb opens, LME stocks will draw quickly. The risk is not a nickel price collapse — it is being caught short of Class 1 nickel when the arb window closes.