The nickel market entered 2026 burdened by a 283,000-tonne surplus from the prior year, and for much of Q1 the consensus view — led by ING and the World Bank — projected another year of heavy oversupply at roughly 261,000 tonnes. That narrative is now under serious challenge. The International Nickel Study Group's April 2026 outlook estimates that Indonesia's tightened ore quotas and a revised pricing benchmark could flip the market to a deficit of just 32,000 tonnes — a dramatic swing of nearly 300,000 tonnes year-on-year. (FACT: INSG, BigMint, April 2026)
S&P Global takes a middle view at 156,000 tonnes of surplus, reflecting uncertainty over how strictly Jakarta will enforce its production limits. Indonesia has set ore output targets at 250–260 million tonnes for 2026, down significantly from prior years, and halted new permits for NPI and matte smelters. Yet the overhang from 2025 remains substantial: combined LME registered and off-warrant stocks ballooned nearly 58% last year to over 367,000 tonnes. LME on-warrant stocks alone stand at 287,550 t, with Chinese and Indonesian origin metal accounting for roughly 75% of total exchange inventories. (FACT: S&P Global, Trading Economics, May 2026)
On the demand side, the picture is mixed. Stainless steel — still over 60% of global nickel consumption — remains subdued amid lacklustre industrial activity in China and Europe. EV battery demand is growing but the structural shift toward LFP chemistries is capping nickel intensity per vehicle. The net result is a market where supply-side discipline is the only bullish lever, and even that is being discounted by the weight of accumulated stocks. LME nickel cash settled at $16,770/t in late May, down 2.5% month-on-month, as the surplus narrative regained some traction. (FACT: ING, Tacto, May 2026)
The competing surplus and deficit forecasts create genuine uncertainty — but the risk asymmetry favours the upside. If INSG is correct and the market tips into deficit, prices could test $20,000/t resistance again. Even if ING's 261 kt surplus materialises, the floor at $16,000/t appears solid given Indonesia's demonstrated willingness to cut quotas. Buyers should treat the current $16,500–$17,000 range as an attractive entry point for covering H2 requirements. A barbell strategy — locking term volumes at current levels while keeping spot flexibility for any correction — is the prudent approach while the market resolves its directional disagreement.