2026 Nickel Market: Supply Oversupply Collides with Weakening Demand

Nickel’s journey through 2026 faces a dual headwind: persistent global surplus and flagging demand from key sectors. While the metal hovered around US$15,000 per metric ton throughout 2025, structural challenges suggest further pressure ahead, with analysts expecting prices to struggle maintaining levels above US$16,000.

The Shifting Landscape of Nickel Chemistry in Battery Technology

The electric vehicle sector, once the primary growth engine for nickel demand, has undergone a fundamental transformation. Battery manufacturers, led by major producers like Contemporary Amperex Technology, have increasingly pivoted toward lithium-iron-phosphate (LFP) chemistry, abandoning the traditional nickel-manganese-cobalt configurations that dominated the previous decade.

This shift reflects significant technological breakthroughs. Advances in LFP battery architecture have eliminated previous performance gaps—vehicles utilizing this chemistry now achieve driving ranges exceeding 750 kilometers, erasing a crucial advantage held by nickel-based batteries. Beyond range parity, LFP solutions offer compelling economic benefits: lower production costs, improved thermal stability, and reduced manufacturing complexity. The density of nickel content in modern battery packs has become secondary to these advantages.

Recent market data underscores this transition’s magnitude. In September 2025, nickel battery demand expanded just 1 percent year-on-year, while LFP battery demand surged 7 percent. This divergence reflects deeper market restructuring, not merely temporary fluctuations.

The policy environment has further complicated prospects. The United States eliminated its EV tax credit in September 2025, triggering a dramatic demand collapse—Q4 EV sales plummeted 46 percent compared to the third quarter. Similarly, the European Union abandoned its proposed 2035 internal combustion engine ban in mid-December. Ford Motor, responding to weakened demand, wrote down US$19.5 billion and realigned its strategy toward extended-range vehicles and hybrids. These policy reversals carry significant bearish implications for battery metal consumption.

Stagnant Core Demand Constrains Price Recovery Potential

Nickel’s primary application—stainless steel production—accounts for over 60 percent of global consumption. Yet China’s construction and manufacturing sectors, which drive the majority of stainless steel demand, remain mired in prolonged weakness. Despite government stabilization efforts in 2024 and early 2025, Chinese property sales deteriorated 36 percent year-over-year through November, extending a 19 percent decline across the first eleven months.

This persistent downturn in China’s property market has directly suppressed nickel fundamentals. Without a meaningful turnaround in construction activity, broader economic recovery alone proves insufficient to reignite metal demand. Analysts anticipate that even optimistic growth scenarios would generate limited price upside given projected surplus conditions.

Indonesian Supply Management: Quota Adjustments and Profitability Thresholds

Indonesia dominates global nickel production, accounting for the vast majority of world supply growth over the past five years. The nation’s output surged from 800,000 metric tons in 2019 to 2.2 million metric tons by 2024—a staggering 175 percent increase reflecting aggressive capacity expansion.

In February 2025, Indonesia’s government elevated its nickel ore quota to 298.5 million wet metric tons from 271 million in 2024, a move ostensibly designed to reduce supply pressures through centralized production management. However, this expansion accelerated accumulation across global inventory networks. London Metal Exchange stockpiles reached 254,364 metric tons by late November 2025, more than 50 percent higher than the 164,028 metric tons recorded at year-start.

Mounting supply triggered a sharp price compression to US$14,295, approaching the lower profitability threshold for Indonesia’s low-cost producers. This development has sparked government reconsideration. According to Shanghai Metal Market reporting, Indonesian authorities are contemplating a substantial production reduction to approximately 250 million wet metric tons in 2026, representing a significant pullback from the 379 million tons outlined for 2025. Final targets remain under discussion, with formalization expected over coming months.

However, ING strategist Ewa Manthey projects limited near-term supply adjustments. Global nickel markets are forecast to remain in surplus by approximately 261,000 metric tons throughout 2026, requiring disproportionately large cuts to fundamentally alter supply-demand dynamics. Meanwhile, structural policy changes introduced in 2025—including a dynamic royalty regime tied to price levels and reduced mining license validity periods—suggest the government is adopting longer-term oversight mechanisms rather than immediate production curtailment.

Price Outlook: Sustained Pressure Expected Through 2026

Current consensus projections converge on subdued nickel valuations extending throughout 2026. ING forecasts average prices of US$15,250, closely aligned with World Bank estimates of US$15,500, with potential advancement to US$16,000 by 2027. The World Bank’s analysis attributes these projections to continued market surplus conditions.

Achieving sustained recovery requires a fundamental repricing mechanism. Western producers—notably those in premium-cost jurisdictions—initiated curtailments when LME prices averaged US$16,812 in 2024, with the market briefly touching US$21,000 in May. Returning to this range would necessitate coordinated, dramatic supply reductions eliminating hundreds of thousands of metric tons annually—a scale requiring significant international coordination unlikely to materialize near-term. Even successful supply constraint implementation would probably require prices exceeding US$20,000 to materially improve producer economics and investor sentiment.

Indonesia’s government has signaled its own price comfort zone: maintaining nickel between US$18,000 at the upper bound—to prevent EV market disruption—and US$15,000 at the lower bound, preventing operational curtailments at domestic smelters. This midpoint preference constrains western producer viability.

Unless unexpected supply disruptions materialize or demand significantly exceeds current forecasts, nickel appears positioned for extended sideways pressure. Short and medium-term recovery prospects remain constrained by structural oversupply and the accelerating shift toward alternative battery chemistries that require less of the metal.