Nickel prices on the London Metal Exchange (LME) surged nearly 5% to a multi-month high after Indonesia, the world’s dominant producer, signaled plans to rein in output from 2026, aiming to reverse a prolonged market slump driven by oversupply.
The nickel market was jolted by an announcement from Indonesia’s Energy and Mineral Resources Minister, Bahlil Lahadalia. In an interview with CNBC Indonesia, he stated the country plans to reduce nickel production starting in 2026 to balance supply with demand and support prices. The news triggered an immediate rally, with LME three-month nickel climbing to $16,560 per ton, its highest level since March.
The proposed cuts underscore Indonesia’s overwhelming influence, accounting for nearly 70% of global nickel supply. The government exercises control through its mining quota system, known locally as RKAB. By tightening the issuance of these quotas, authorities can effectively regulate the flow of raw material and global supply. The minister’s statement is seen as a clear intent to “tighten the tap.”
The move highlights a market paradox engineered by Indonesia itself. A decade of explosive output growth, fueled by resource wealth and policy incentives, transformed the nation into a primary source for stainless steel and electric vehicle (EV) batteries. However, this flood of supply eventually drowned demand, depressing prices throughout much of 2025 and leading to swelling LME inventories.
Despite its market dominance, Indonesia has felt the sting of low prices. Compounding the issue, demand from the crucial battery sector has underperformed. EV makers are increasingly adopting more affordable, nickel-light battery chemistries like lithium iron phosphate (LFP), dimming the long-term demand outlook for nickel.
While the policy signal has successfully ignited bullish sentiment in the short term, a sustained recovery faces significant hurdles. The World Bank’s nickel price outlook aligns with the recent rally, forecasting an average of $16,000/ton for 2027.
However, the underlying surplus remains substantial. Russian producer Nornickel, one of the world’s largest, still projects a global refined nickel surplus of 275,000 metric tons for 2026. Analysts suggest that Indonesia’s cuts must be both deep and strictly enforced to meaningfully draw down excess stocks.
Market observers caution that without a fundamental shift in demand dynamics—such as a return to nickel-intensive EV batteries or new demand sources—any price rally may face a ceiling. The resolve and scale of Indonesia’s supply discipline will be the central variable dictating nickel’s trajectory over the next two years.
