LME three-month nickel settled at $16,115/mt on July 3, essentially flat on the week after a 14 percent correction from the May high of $19,350/mt. The Q3 average stands at $16,120/mt. On the Shanghai Futures Exchange, nickel closed at 144,990 CNY/mt, up 2.06 percent. LME inventories continue to swell, reaching approximately 287,000 mt, up more than 40 percent year-on-year, reinforcing the narrative of persistent oversupply.
The nickel market is defined by Indonesia. The country now supplies approximately 60-65 percent of global nickel output through a massive buildout of nickel pig iron (NPI), mixed hydroxide precipitate (MHP), and matte production capacity, backed by an ore export ban that channels all raw material into domestic processing. In 2026, Indonesia announced ore quota cuts (RKAB) to support prices — a significant policy shift after years of unrestrained expansion. But the impact is less dramatic than the headlines suggest. Most major forecasters still see a global surplus for 2026: ING estimates 261,000 mt, SMM projects 120,000 mt, and DiscoveryAlert's base case is 100,000-150,000 mt.
The demand side offers limited relief. Stainless steel accounts for more than 60 percent of global nickel consumption, and growth in this sector is expected to be sluggish in 2026 due to weak global manufacturing conditions. The EV battery sector — the structural growth story that drove nickel investment in 2021-2023 — is proving a more modest demand driver than initially projected. OEMs have increasingly adopted LFP (lithium iron phosphate) and other low-nickel or no-nickel chemistries, muting the growth in nickel demand from the battery sector. While long-term EV-led demand growth remains intact, the near-term picture is one of oversupply and elevated inventories that cap any sustained rally.
Price forecasts for the remainder of 2026 cluster in a wide $15,000-19,000/mt band. ING projects an average of $15,250/mt for 2026. Goldman Sachs raised its forecast to $17,200/mt after the Indonesian quota tightening. Macquarie is at $17,750/mt. Fastmarkets and Wood Mackenzie see a $17,000-19,000/mt band under current policies. The bear case — Indonesian quotas loosen or demand disappoints — could see prices revisit $14,000-15,500/mt. The bull case — strict RKAB enforcement removes up to 700,000 mt of ore, flipping the market to deficit — could push prices above $20,000/mt.
The wildcard is Indonesia's ore policy. BMO warns that a strict cap on ore output — approximately 250 million mt versus the 2025 level of roughly 379 million mt — could remove up to 700,000 mt of contained nickel and potentially flip the market from surplus to deficit. Indonesia has signaled a willingness to actively manage output, framing it as a rebalancing of supply and demand with environmental co-benefits. This policy risk premium means every announcement from Jakarta will produce a price spike. But the underlying surplus is large enough to absorb significant cuts before the balance flips.
For stainless steel buyers, the environment is favorable. Oversupplied nickel feeds directly into lower alloy surcharges. For EV battery supply chains, the shift toward LFP is reducing nickel intensity per vehicle, which limits the growth of nickel demand from this sector despite rising EV penetration. The structural long-term case for nickel remains intact — high-nickel chemistries are needed for energy density in premium EVs and grid-scale storage — but the near-term supply overhang will keep prices anchored below $19,000/mt absent a major policy shock.
For nickel buyers, the macro message is clear: the market is oversupplied and likely to stay that way for the remainder of 2026. Indonesia's quota tightening is real but incremental — it reduces the surplus from 260 kt to 100-150 kt, it does not create a deficit. The price ceiling from Indonesian policy is approximately $19,000/mt; the price floor from production costs is approximately $14,000-15,000/mt. Within that range, the dominant variable is Indonesia's quota policy announcements. Every signal from Jakarta about 2027 quotas will produce a price spike or sell-off. The structural message for long-term planning is more concerning. If Indonesia continues to tighten ore quotas — effectively acting as an 'OPEC of one' — the surplus could vanish by 2028. Given the 5-7 year lead time for new nickel projects outside Indonesia, buyers should begin conversations about long-term off-take agreements now, not when the deficit arrives.