Indonesia's dominance of the nickel market — approximately 60-70% of global output — means any policy move in Jakarta reverberates through prices. In 2026, the Indonesian government has cut mining quotas, targeting 250-260 Mt of ore versus higher levels in prior years. Curbs at large hubs like Weda Bay have tightened ore availability for domestic NPI smelters. But the structural surplus remains: installed Indonesian NPI capacity exceeds 3 Mt per year.
The quota constraints are starting to limit ore feed for some NPI smelters, but plants can draw on ore stockpiles in the near term. Sustained tight quotas would ultimately reduce NPI output and tighten the Class 2 balance, but for now the market still expects Indonesian supply growth to keep aggregate nickel in surplus through at least 2026.
Demand-side, stainless steel accounts for 60-70% of global nickel consumption, and 2026 stainless demand is described by analysts as uneven and sluggish. Chinese stainless mills remain the dominant consumers, relying heavily on Indonesian and Chinese NPI. Demand growth is inadequate to absorb the supply surge.
Battery demand — the long-term growth story — is growing but not fast enough. EV adoption continues, but material substitution toward LFP and lower-nickel chemistries is increasingly affecting nickel demand projections. This moderates the Class 1 tightness narrative. The battery sector now accounts for roughly 15-20% of total nickel demand, still insufficient to absorb Indonesian supply growth.
The price outlook from analysts ranges from $15,000-18,000/mt for 2026, with the consensus toward the lower end given the persistent surplus. Intermittent policy shocks from Indonesia provide trading ranges but not a trend reversal.
Nickel buyers should treat the current price range as a fair reflection of fundamentals. The 261 kt surplus means no urgency to build inventory — wait for policy-driven spikes to cover prompt needs. For stainless buyers, NPI pricing from Indonesia at a discount to LME provides the most cost-effective sourcing. For battery-grade buyers, the LME-SHFE arbitrage matters. The key risk to watch: any sustained Indonesian ore export ban would reverse the surplus narrative within weeks.