Nickel spikes on Indonesia quota risk

Nickel extended its rally on Wednesday after reports of deep mining-quota cuts this year in Indonesia tightened supply expectations.

The London Metals Exchange (LME) three-month contract traded around $18,460 (about C$25,500) per tonne in midday dealing, leaving prices up roughly 24% over the past month.

The move follows an 8.9% surge on Tuesday that BMO Capital Markets said took LME three-month nickel to $18,524 per tonne – its highest level since mid-2024 – amid heavy buying linked to Chinese customers and talk that Jakarta could slash 2026 ore production quotas by about a third. On Wednesday, spot indicators hovered near $18,350–$18,450 per tonne, according to Kitco and TradingEconomics.

“Nickel prices continue to surge in response to news reports suggesting that Indonesia will significantly slash nickel ore production quotas in 2026,” BMO Capital Markets analysts said Wednesday in a note to investors. Indonesia’s supply cut to about 250 million tonnes of ore could remove as much as 700,000 tonnes of nickel supply – enough to flip the market from surplus to deficit, the analysts said.

Indonesia’s Energy and Mineral Resources Minister, Bahlil Lahadalia, last month flagged plans to reduce output quotas via the annual RKAB system – Indonesia’s annual work plan and budget approvals that set each miner’s ore-production and shipment quotas – though exact volumes for nickel have not been finalized. Separate reports from Shanghai Metals Market and APNI point to a 2026 ore cap of about 250 million tonnes, roughly one-third less than last year’s 379 million tonnes – supporting the latest price squeeze.

Price cap

Even with this week’s price spike, BMI/Fitch Solutions expects nickel to average $15,500 per tonne this year, arguing that it sees a global surplus persists – widening somewhat to about 250,000 tonnes next year as Indonesia continues to add capacity.

Policy shifts in Indonesia and tougher conditions for producers outside the country could still put a floor under prices, the firm said Monday in a report.

Demand growth should firm modestly in 2026, BMI also notes, though battery use of nickel is lagging earlier expectations as lithium-iron-phosphate chemistries gain share and buyers favour plug-in hybrids – another reason the firm expects the surplus could linger.

Not cast in stone

Jakarta’s quota cuts are not yet codified, leaving room for price outlook revisions. Recent regulatory changes mean quotas are now set annually, adding uncertainty for miners and smelters planning feedstock needs.

Despite potential export curbs, Indonesia is poised to remain the biggest refined producer through 2034. BMI projects output will climb to 4.2 million by 2034 from 1.7 million tonnes this year, pressuring higher-cost peers.

Longer term, BMI’s model lifts the average nickel price to $26,000 by 2033–34 as surpluses narrow. Consumption is forecast to roughly double by 2034 to about 7 million tonnes on clean-energy and stainless demand.