The fundamental question hanging over the nickel market in mid-2026 is a stark one: how can a commodity with a forecast surplus of 261,000 tonnes, warehouse stocks of 250,000 tonnes, and sluggish end-use demand be trading at $19,410 per tonne — up nearly 25% year-on-year? The answer lies in the growing divergence between macroeconomic fundamentals and Indonesian policy intervention. (FACT: ING Think, 2026; LME, May 4, 2026; Trading Economics, May 4, 2026)
ING's base case for 2026 projects a substantial market surplus of 261,000 tonnes, reflecting continued growth in Indonesian refined nickel production combined with relatively weak demand from both the stainless steel and electric vehicle battery sectors. The surplus adds to an already burdensome inventory overhang — LME nickel stocks stood at approximately 250,000 tonnes by late 2025, the highest since the 2022 short-squeeze crisis, with SHFE contributing another 45,000 tonnes. (FACT: ING Think, 2026; LME, 2026; SHFE, 2026)
Demand-side headwinds are real and measurable. Global stainless steel production growth has disappointed, with the European and US stainless markets operating below capacity as industrial activity remains subdued. The 300-series stainless market — the primary consumer of nickel — has seen only modest recovery from 2024 lows. Meanwhile, the much-anticipated nickel demand surge from electric vehicle batteries has failed to materialize at the scale forecast. The shift toward LFP (lithium iron phosphate) battery chemistry in the EV space has structurally reduced nickel intensity per vehicle, while Chinese EV adoption has moderated. (FACT: ING Think, 2026; Carbon Credits, 2026; S&P Global, December 29, 2025)
Yet despite these bearish fundamentals, LME nickel has rallied from a December 2025 low of approximately $14,400/t to trade in the $18,500-19,500/t range by May 2026. The catalyst is Indonesia's 30-34% reduction in its 2026 RKAB nickel ore quota, which has introduced a policy-driven supply constraint in the upstream ore market that is not captured in aggregate surplus forecasts. (FACT: IDNFinancials, April 28, 2026; Trading Economics, May 4, 2026)
The tension is structural and will persist. The surplus forecasts from ING, INSG (at 260-288,000 tonnes), and other analysts are built on Class 1 refined nickel balances — the LME-traded cathode that Indonesian and Chinese smelters produce at scale. But the RKAB cut operates at the ore level, constraining the feedstock for the entire processing chain. NPI and ferronickel producers face the most immediate ore shortages, while Class 1 producers with captive ore supply are relatively insulated. The surplus is real — but it is concentrated in class 1 metal, not the broader nickel supply chain. (FACT: ING Think, 2026; INSG, 2026; Wood Mackenzie, 2026)
This creates a bifurcated market where different participants face entirely different realities. For a stainless mill buying NPI, the market has tightened sharply — Indonesian ore premiums have surged, and smelter utilization rates have dropped to 70-75%. For a cathode trader with access to LME warehouses, the market remains well-supplied — the 250,000 tonnes of inventory provides deep liquidity and caps any sharp rally. The LME price becomes an average that masks this split, creating opportunities for those who can source and price Class 1 and Class 2 products separately. (FACT: IDNFinancials, April 28, 2026; ING Think, 2026)
ING's price forecast of $15,000-17,000/t average for 2026 now looks conservative relative to the post-RKAB-cut reality. With Indonesia signaling a sustained policy of supply restriction, the market is re-pricing to a higher equilibrium. However, the 250,000-tonne LME inventory overhang means that any spike above $20,000/t would likely attract physical selling, capping the upside. The market is effectively range-bound between a policy floor at $19,000-20,000/t (based on the Indonesian government's implicit target) and a surplus ceiling imposed by exchange inventories. (FACT: ING Think, 2026; S&P Global, December 29, 2025)
The battery demand narrative remains a wild card. While near-term EV adoption has disappointed, the structural demand outlook for nickel in batteries over a 3-5 year horizon remains constructive. If Indonesian policy discipline and eventual demand recovery converge, the surplus could flip to deficit faster than consensus expects. But for 2026, the market remains in surplus — just a surplus that is increasingly disconnected from the LME price due to Indonesia's willingness to intervene. (FACT: Carbon Credits, 2026; ING Think, 2026)
The nickel market in mid-2026 offers a study in contradictions. A headline surplus of 261kt coexists with LME prices at $19,410/t because Indonesia has effectively put a floor under the market. Key implications: (1) Do not rely on surplus forecasts alone — they measure Class 1 refined metal, not the ore-constrained NPI market that serves the stainless sector. Source the two markets separately. (2) The $15,000-17,000/t ING forecast is the wrong reference point for procurement decisions — Indonesia's policy floor has shifted the effective support level to $19,000-20,000/t. (3) Monitor LME inventory trends closely — a sustained draw below 200,000 tonnes would signal that the surplus is eroding and support a move toward $22,000-25,000/t. (4) Battery nickel demand remains a long-term bullish factor but offers no support for 2026 pricing — do not pay a battery premium in current contracts.