LME nickel inventories climbed to 276,216 tons as of the latest count — a four-year high and an 85% increase since the start of 2026. The relentless inventory build is the most visible symptom of a market drowning in supply. The INSG's June update pegs the 2026 surplus at 180,000–200,000 tons, up from 145,000 tons in 2025.
Indonesia is the engine of oversupply. The country produced 1.52 million tons of nickel (contained) on an annualized basis in May, up from 1.38 million tons in 2025 and just 850,000 tons in 2022. New HPAL projects continue to come online: the PT QMB Obi Island expansion added 36,000 t/yr in March, and the IMIP二期 (Phase 2) project commissioned 24,000 t/yr in April. There are at least 12 additional HPAL and RKEF projects in the pipeline for late 2026 and 2027.
The only potential supply-side check is Indonesian government policy. In April, the Ministry of Energy and Mineral Resources proposed a moratorium on new RKEF smelter permits, but the proposal has not advanced, and existing permitted projects — totaling an estimated 600,000 tons of additional annual capacity — are grandfathered. Even if a moratorium were enacted today, the projects already under construction would add 250,000–300,000 t/yr through 2027.
Nickel is not going to tighten for at least 18 months. That's not a forecast — it's math. With 600,000 tons of permitted-but-unbuilt capacity in Indonesia and 250,000 tons already under construction, supply will keep growing faster than demand. For buyers, the strategy is straightforward: structure contracts for maximum downside capture. Use LME average monthly settlement with a discount, not a fixed price. If your supplier won't budge on premium, negotiate on payment terms — 60-day net instead of 30 — since nickel's carrying cost is low when prices are drifting down. And watch Indonesian policy: a real moratorium on new permits would take 3–4 years to tighten the market, but it would signal a future trend change worth hedging.