The International Nickel Study Group projects a 2026 nickel market deficit of approximately 32,000 tonnes — the first yearly deficit since 2021. This forecast marks a dramatic reversal from the structural surpluses that characterized the market between 2022 and 2025, when rapid Indonesian capacity additions overwhelmed demand growth.
The deficit is driven by two forces: slowing supply growth and accelerating demand. On the supply side, Indonesian output — which had grown at 25% annually in 2023-2024 — decelerated to about 5% growth in 2025-2026 as the government constrained new RKAB permits. Production growth outside Indonesia remains minimal, with several high-cost operations in Australia and New Caledonia curtailed or closed.
Demand is growing at approximately 7% annually, led by the battery sector (+35% year-on-year for battery-grade nickel) and supported by a steady 3% growth in stainless steel production. Energy storage installations, which grew 60% year-on-year in 2025, are a fast-growing consumer of nickel-rich NMC battery chemistry.
The deficit is modest relative to the market size (approximately 3.3 million tonnes annually), but it represents a significant psychological shift. After four years of surplus-dominated sentiment, the INSG deficit projection encourages re-stocking by consumers who had been running lean inventories.
LME nickel inventories remain elevated relative to historical levels, providing a buffer that limits the upside. On-warrant stocks are approximately 150,000 tonnes — high by pre-2021 standards but drawn from 2023 peaks above 200,000 tonnes. The decline trajectory, not the absolute level, is the signal to watch.
The INSG deficit forecast is a structural regime change for nickel. If you have been running lean nickel inventories on expectations of continued surplus, this is the signal to rebuild coverage. The deficit is modest, but the direction change matters more than the magnitude. Consider hedging at least H1 2027 volumes at current levels — the surplus era is ending.