Nickel prices surged to a three-week high, with the London Metal Exchange (LME) 3-month nickel price reaching $18,485 per ton, up 3.6% from the previous session. This rally was primarily driven by renewed concerns about nickel supply from Indonesia, the world's largest producer, coupled with expectations that the U.S. Federal Reserve might adopt a less aggressive monetary policy. The rise follows a period of volatility where prices had dipped significantly in June after reaching a two-year high in May.
The volatility in nickel markets, and the recent price jump, are heavily influenced by policy decisions in Indonesia, which accounts for about 60% of global nickel production. In late June, reports emerged from Bloomberg suggesting that Indonesia's Energy and Mineral Resources Ministry might increase mining quotas (RKABs) to 360 million tons for 2026, up from the initially approved 260-270 million tons. This potential relaxation of quotas, following an earlier tightening that had pushed prices to an 18-month high of $18,950 per ton in January, creates uncertainty in the market.
Adding to supply concerns, the operational status of some Indonesian nickel facilities, such as Weda Bay, which was placed under care and maintenance in May after exhausting its allocation, signals that the quota system is indeed impacting physical production. The earlier tightening of quotas, combined with higher ore prices and a global sulfur shortage impacting intermediate product conversion, had created a constructive outlook for nickel prices, with CRU forecasting averages above $18,000 per ton. However, any significant easing of Indonesian policy could quickly shift the market back toward a surplus, making it susceptible to sudden price movements.
The global nickel market has transformed in the first half of 2026, moving from a surplus to a more balanced or even tight state. This shift is attributed to supply disruptions in Indonesia, a tighter sulfur supply due to the Middle East conflict, and increased ore costs. Demand for nickel remains healthy, with stainless steel production recovering and battery-related nickel demand projected to grow by 12% year-on-year in 2026 to around 560,000 tons annually, driven by Chinese pCAM production and strong European EV demand. Despite some shifts towards LFP battery chemistries, nickel retains its importance in high-performance battery applications.
