If nickel markets obeyed textbook supply-demand logic, prices in mid-2026 would be heading decisively lower. LME nickel inventories stand at approximately 287,000 tonnes — a 44% year-on-year increase that represents the highest visible stockpiles since mid-2021. Argus estimates a global refined nickel surplus of 288,000 tonnes for 2026. Battery-sector demand — once the bull case for nickel — continues to underwhelm, with automakers and battery producers increasingly shifting toward lithium-iron-phosphate (LFP) and other non-nickel cathode chemistries.
Yet LME three-month nickel trades near $18,800/t, down only marginally from the start of the year and well above the $15,000–$16,000/t levels that a pure surplus narrative would imply. The disconnect is the Indonesia factor.
Jakarta's aggressive RKAB ore-quota reductions — cutting the national allocation by roughly 30% to 250–270 Mt — have fundamentally altered the market's risk calculus. While the cuts may not eliminate the global surplus, they create an effective floor under prices by raising the marginal cost of production and signalling that Indonesian policy, not free-market supply-demand, will set the medium-term price direction.
Macquarie Bank, in a research note published this week, raised its 2026 average nickel price forecast by 18% to $17,750/t, citing "growing production discipline in Indonesia and reduced ore availability." The revision brings Macquarie's view closer to the prevailing spot range and acknowledges that the downside from surplus alone is limited as long as Jakarta maintains quota discipline.
The stainless steel sector — still the dominant demand driver for nickel, accounting for roughly 70% of consumption — continues to chug along at moderate growth of 2–3% annually. Stainless mills in China and Indonesia have maintained steady output, providing a baseline bid for NPI and ferronickel units. But the expected demand surge from electric vehicle batteries has failed to materialise at the scale forecast just two years ago. LFP chemistries now account for over 50% of global EV battery market share, and nickel-rich NMC chemistries face margin pressure as cobalt prices remain elevated.
The result is a market that trades in a range: $17,500–$19,500/t seems to be the current equilibrium band, with the surplus establishing the ceiling and Indonesian policy creating the floor. Breakouts in either direction require a catalyst — either a deeper-than-expected quota enforcement (bullish) or a collapse in stainless demand (bearish).