LME nickel rises 2% on tighter ore outlook, Indonesian export policy uncertainty

• PT Weda Bay Nickel to temporarily halt mining activity
  
  
• Ceasefire extension, weaker US dollar lend support
  
  

London Metal Exchange (LME) nickel futures strengthened during the week ended 29 May 2026, with the three-month nickel contract closing at $19,125/t, up 2% w-o-w from $18,760/t. Meanwhile, LME warehouse inventories declined 1% to 276,864 t from 279,072 t a week earlier, indicating relatively balanced exchange stock levels.

Indonesia developments keep market supported

Nickel market sentiment remained cautiously bullish during the week, supported by continued uncertainty surrounding Indonesia's nickel sector. Indonesia's decision to exempt nickel pig iron (NPI) from its proposed state-controlled export mechanism eased immediate concerns over disruptions to stainless steel raw material supply chains. However, market participants remained watchful over the future scope of the policy, particularly regarding ferro nickel exports and potential inclusion of additional nickel products under strategic commodity controls.

Industry participants noted that tighter production quota (RKAB) approvals, revised ore pricing mechanisms, and increased government oversight of commodity exports continue to reinforce expectations of tighter nickel raw material availability over the medium term.

Weda Bay quota cuts tighten ore outlook

Further support came from PT Weda Bay Nickel's announcement that it may temporarily suspend mining activities following a sharp reduction in its production quota to 12 million wet metric tonnes (mwmt) from 42 mwmt previously. Market participants believe that lower output from one of Indonesia's largest nickel mining operations could tighten ore availability for domestic smelters and the Indonesia Weda Bay Industrial Park (IWIP), potentially increasing reliance on ore supplies from Sulawesi and the Philippines.

The development has strengthened expectations of firmer nickel ore and NPI prices amid already tightening Indonesian ore availability and stricter mining approvals.

Weaker US dollar supports base metals

Nickel prices also received support from broader macroeconomic developments. A 60-day ceasefire extension agreement weakened the US dollar, improving investor appetite across the base metals complex and supporting gains in LME nickel. Although nickel prices remain down around 1.9% m-o-m during May, they are still up nearly 14.7% year-to-date, with average May prices tracking above April levels.

At the same time, rising processing costs, firm nickel ore premiums, and ongoing supply-side disruptions continue to underpin sentiment across the nickel value chain.

Muted Chinese stainless steel demand limits upside

Despite supportive supply-side developments, stronger gains were capped by subdued stainless steel demand in China. Market participants reported cautious raw material procurement by stainless steel mills amid seasonal demand weakness and softer finished steel transactions.

In addition, relatively stable NPI prices and the continued cost advantage of stainless steel scrap over primary nickel units limited aggressive buying interest for nickel-bearing raw materials.

Outlook

Nickel market sentiment is expected to remain cautiously bullish amid tightening Indonesian ore availability, lower RKAB quotas, and ongoing uncertainty surrounding export policy developments. However, relatively comfortable LME inventory levels and weak stainless steel demand in China are likely to limit any sharp upside.