The nickel market is experiencing a paradox: LME inventories are elevated at 287,550 tonnes (+44% year-on-year), yet ore supply is tightening significantly. As one analyst described it, the LME has become 'the dumping ground for Class 1 that nobody needs and wants,' while raw-material shortages constrain production of intermediate products like NPI and nickel matte.
The structural divide is driven by Indonesia's dual role. The country floods global markets with lower-purity Class 2 units used in stainless steel, while the quota system restricts ore availability for domestic smelters. Chinese cathode's share of LME tonnage rose to 70% in late 2025. Including Indonesian-origin metal, the share went to 75%, up from 55% in January — reflecting massive export-oriented refining capacity.
For buyers, the implication is clear: there is no shortage of deliverable nickel on paper, but physical availability of specific product forms and grades varies significantly. Glencore's Q1 nickel production fell 9% YoY and Anglo American's dropped 7% YoY, signaling that the production response to Indonesia's quota tightening is already underway at Western producers.