Global: LME nickel prices rebound in Q1CY'26 as Indonesian curbs tighten supply outlook

• Indonesian production quota cuts, revised ore pricing mechanisms lift prices
  
  
• 32,000-t deficit expected in 2026 against earlier forecast surplus of 261,000 t
  
  

London Metal Exchange (LME) nickel staged a strong recovery in Q1CY'26 after opening the year near multi-year lows, with a price jump driven by tightening supply expectations, Indonesias mining restrictions, and improving sentiment across the base metals complex. However, the market remained volatile, with ample inventories and lingering surplus conditions continuing to cap sharper upside.

LME three-month nickel opened 2026 near multi-year lows after ending 2025 under sustained pressure from oversupply and aggressive Indonesian production growth. Prices had fallen below $15,000/tonnes (t) during late 2025, with the annual average for 2025 estimated around $16,800-17,200/t, compared with averages above $21,000/t in 2023.

In Q1CY'26, sentiment shifted noticeably. Nickel averaged around $15,600/t in January before strengthening steadily through February and March on tightening supply expectations and improving macro sentiment across base metals. Prices gained nearly 17% during the quarter and moved close to $17,000/t by mid-April. Momentum accelerated further in early May, when LME nickel briefly crossed $20,000/t for the first time since 2024, supported by Indonesias mining quota cuts, revised formula for calculating the benchmark Harga Patokan Mineral (HPM) pricing, rising sulphur costs, and concerns over tighter ore availability.

Indonesia remains key market driver

Indonesia, which contributes nearly 60% of global nickel output, remained the central factor influencing global price direction. The governments 2026 mining quota allocation, estimated at around 260-270 million wet metric tonnes (wmt), was significantly lower than the previous years 379 million wmt, tightening expectations for ore availability.

Additional disruptions further strengthened bullish sentiment. Vale Indonesia temporarily suspended mining activity following delays in mine-plan approvals, while several producers, including operations linked to Weda Bay, reportedly received reduced production allocations. Market participants noted that tighter enforcement of mining regulations and revised ore pricing mechanisms have significantly altered near-term supply expectations.

The revised Indonesian HPM benchmark pricing mechanism, implemented from 15 April, also increased domestic nickel ore floor prices. This particularly impacted high-pressure acid leach (HPAL) producers supplying battery-grade nickel products, as HPAL operations remain more sensitive to ore, sulphur, and energy costs compared with rotary kiln electric furnace (RKEF) producers.

Cost inflation adds further pressure

Beyond mining restrictions, rising sulphur and energy costs added further pressure to global nickel supply chains. The Middle East, accounting for nearly one-fourth of global sulphur trade, continues to face logistical and freight disruptions amid ongoing geopolitical tensions. Since sulphur remains a critical reagent for HPAL operations, higher costs have increased concerns over production economics and project ramp-ups.

Freight volatility and elevated energy prices also continued to impact overall stainless steel and nickel production costs globally, particularly across Asia.

China demand offers support, but spot buying cautious

On the demand side, Chinas stainless steel sector continued to provide a stable consumption base, supported by a gradual recovery in manufacturing and infrastructure-linked demand. Stainless steel futures in China also strengthened during April amid tighter scrap availability and temporary production cuts by some nickel-cobalt producers.

However, physical buying activity remained relatively cautious. Market participants noted that futures gains have outpaced spot demand recovery, with downstream buyers continuing hand-to-mouth procurement strategies amid uncertainty over the sustainability of higher prices.

Tightness in stainless steel scrap availability also pushed some Chinese mills to increase reliance on nickel pig iron (NPI), supporting upstream nickel demand despite softer import appetite.

Market balance shifting towards deficit

The International Nickel Study Group (INSG) recently revised its 2026 market outlook, projecting a global nickel deficit of around 32,000 t compared with an earlier forecast surplus of 261,000 t. The revision reflects lower Indonesian supply expectations and rising concerns over raw material availability.

Global nickel supply in 2026 is projected at 3.715 million tonnes (mnt), while consumption is estimated at 3.747 mnt, driven by stainless steel and battery sector demand growth.

Despite this tightening outlook, the market is still expected to remain in surplus during 2025, with inventories acting as an important buffer against immediate shortages.

Outlook

Nickel prices are expected to remain volatile but firm in Q2CY'26, supported by Indonesia-led supply tightening, rising input costs, and improving sentiment across stainless steel and battery sectors. However, ample exchange inventories and cautious physical demand may restrict sustained upside.

Future price direction will largely depend on Indonesias mining policy enforcement, developments in ore quotas and HPM pricing, along with the pace of recovery in Chinas stainless steel and battery demand. Any relaxation in Indonesian supply controls could quickly ease bullish sentiment, while prolonged supply discipline may continue supporting elevated nickel prices through 2026.