Will Nickel Prices Find Balance in 2026? A Market Turning Point Analysis

The nickel market enters 2026 at a crossroads. After spending much of 2025 languishing near US$15,000 per metric ton, the metal faces a fundamental challenge: achieving equilibrium between bloated supply and flagging demand. This convergence of headwinds has created what many see as a critical juncture for price recovery.

The Supply Puzzle: Indonesia’s Production Tug-of-War

Indonesia’s mining policies are shaping nickel’s trajectory more than any other single factor. The world’s dominant nickel producer has pursued aggressive expansion, ramping output from 800,000 MT in 2019 to 2.2 million MT by 2024. Early 2025 saw another step up: the government raised its nickel ore quota to 298.5 million wet metric tons, representing a jump from 271 million WMT the previous year.

The consequence was immediate and visible. London Metal Exchange stockpiles ballooned to 254,364 MT by November 2025—a 55% surge from 164,028 MT at year-start. As warehouses filled, prices compressed toward US$14,295, testing the profitability floor for low-cost smelters.

Now Indonesia appears to be reconsidering its approach. Market reports suggest the government is exploring a production cut to approximately 250 million MT in 2026, down sharply from the 379 million WMT originally targeted. This represents a critical signal, though final decisions remain uncertain and further policy announcements are expected.

Yet even deeper production cuts may not solve nickel’s dilemma. Global nickel supply is forecast to exceed demand by around 261,000 MT in 2026. Without coordinated international action—a scenario many view as unlikely—supply-side adjustments alone won’t restore balance. Industry observers note that prices would need sustained levels above US$20,000 to meaningfully improve producer profitability, a threshold that appears out of reach under current market conditions.

Demand Headwinds: The Stainless Steel and Battery Question

Nickel’s primary use—stainless steel production—is experiencing structural weakness. Over 60% of global nickel consumption flows into this sector, yet Chinese housing demand, which drives much of this consumption, remains depressed. November 2025 property sales plummeted 36% year-on-year, with the first 11 months showing a 19% decline. Without a meaningful property market recovery, stainless steel demand will likely remain subdued.

The EV battery sector, once thought to be nickel’s growth engine, is also evolving in unexpected directions. Contemporary Amperex Technology and other major producers are increasingly adopting lithium-iron-phosphate chemistry over traditional nickel-manganese-cobalt formulations. Recent LFP advances have closed the performance gap, with new vehicles achieving 750+ kilometer ranges while offering lower production costs and enhanced safety profiles.

The data tells the story: nickel battery demand rose just 1% year-on-year in September 2025, while LFP battery demand jumped 7%. Beyond this, Western EV markets face their own headwinds. The US elimination of the EV tax credit in September triggered a 46% collapse in American EV sales comparing Q4 to Q3 2025. Ford Motor subsequently scaled back its EV roadmap with a US$19.5 billion writedown, and the EU abandoned its 2035 internal combustion engine ban—policy reversals that dampen demand prospects for battery metals including nickel.

The Price Outlook: Navigating Structural Challenges

Consensus forecasts suggest nickel prices will face persistent downward pressure throughout 2026. Analysts project average prices around US$15,250 for the year, with prices likely struggling to hold above US$16,000 given ongoing surplus conditions. The World Bank’s outlook aligns with this, forecasting US$15,500 for 2026 and US$16,000 for 2027. Nornickel’s projections of a 275,000 MT refined nickel surplus in 2026 reinforce this bearish backdrop.

For prices to meaningfully appreciate, unexpected supply disruptions would be required, or demand growth would need to substantially exceed current forecasts across both stainless steel and battery applications. Without such catalysts, nickel’s recovery window appears to be closing rather than opening in the immediate term.

The Broader Context: Policy Shifts Matter

Indonesia’s policy framework continues evolving. A shift from flat 10% royalties to dynamic rates of 14-18% (based on price levels), combined with reduced mining license validity periods from three to one year, signals the government’s intent to exercise tighter oversight. These mechanisms provide the government flexibility to manage production in response to market conditions, though their effectiveness remains to be tested.

The fundamental question facing nickel in 2026 is whether market participants will voluntarily constrain supply, or whether prices will simply drift lower until producer economics force the issue. History suggests the latter scenario is more probable—a painful but ultimately clarifying outcome for the sector.