Nickel prices jumped to their highest level in nearly two years, propelled by a deepening supply crunch in Indonesia and wartime disruptions to critical chemical shipments from the Middle East, prompting research firm BMI to sharply lift its price forecast for 2026.
Three-month nickel on the London Metal Exchange surged as much as 2.8% on Monday to touch its strongest since June 2024, before paring most of those gains to settle 0.7% higher at $19,155 a metric ton. The metal has now rallied roughly 7% since the Iran conflict erupted.
At the heart of the rally sits Indonesia, which dominates global nickel supply. Jakarta has slashed the 2026 mining quota to between 260 million and 270 million wet metric tonnes, a dramatic reduction from 379 million tonnes a year earlier. The cut has swiftly tightened the ore supply outlook and brightened market sentiment.
But an unexpected new variable has turbocharged the move: sulfur. The Iran war has sent prices of the chemical soaring. Sulfur is essential to the high-pressure acid leaching process used to extract nickel, and Indonesia relies on the Middle East for more than two-thirds of its imports. With supply lanes disrupted, several Indonesian processors have been forced to cut output by at least 10%, Reuters reported this week, directly choking production of mixed hydroxide precipitate — a key intermediate for battery-grade nickel.
“The market remains bullish on nickel,” Jinrui Futures said in a note, adding that traders are now watching for concrete evidence of substantial MHP output cuts that could act as the next catalyst for further gains.
That tightening supply picture has emboldened BMI. The research house on Tuesday raised its average nickel price forecast for 2026 to $16,600 a tonne, up sharply from $15,800 previously, citing what it called “a structurally firmer price environment.” It expects both the Iran war and Indonesia’s output restrictions to keep prices supported throughout the year.
BMI’s bullish argument leans heavily on the compounding effect of Indonesia’s supply constraints. While the country’s refined nickel production is still forecast to grow — by 9% in 2025 and 9.8% in 2026 — the combination of lower mining quotas, sulfur-related MHP disruptions and rising input costs is materially reshaping near-term supply dynamics, offering staged upside momentum.
Yet the firm is not ignoring the broader picture. It expects the global nickel surplus to widen modestly to around 324,000 tonnes in 2026, a persistent glut that will act as a cap on any sustained price rally. The current supply-driven upswing, BMI cautioned, still operates within a fundamentally oversupplied market.
The price action on Monday reflected that dichotomy. After spiking to a near two-year peak, nickel quickly gave back the bulk of its intraday gains. With US-Iran ceasefire talks stuck in a stalemate, the trajectory of sulfur flows and any further Indonesian policy shifts remain the big unknowns. For now, BMI’s message is calibrated: when Indonesia’s quota scissors and the Middle East’s sulfur shipping lanes tighten in tandem, nickel can defy its glut cycle — at least temporarily.
