Nickel prices surged to a nine-month high, boosted by plans from the world's largest producer, Indonesia, to reduce supply. At the time of writing, LME nickel futures rose more than 5% to $16,600.88 per metric ton.
Indonesia's Energy and Mineral Resources Minister, Bahlil Lahadalia, stated that nickel production will be cut in 2026 to better align supply with demand. Indonesia's nickel output has expanded rapidly over the past decade, and the country now accounts for nearly 70% of global production, making it the world's largest nickel producer.
The planned production cut for 2026 is primarily a response to declining nickel prices. A report from earlier in December indicated that, according to the government's work plan and budget for the upcoming year, the nickel ore production target for 2026 is set at approximately 250 million tons, nearly one-third lower than the 2025 target of 379 million tons.
Nickel is widely used in stainless steel and electric vehicle batteries. However, due to the emergence of alternative chemical compositions and weak EV demand stemming from policy pullbacks in Europe and the US, nickel has been one of the worst-performing industrial metals this year.
Despite low prices for much of the year, Indonesia's supply has continued to increase, leading to a rapid buildup of inventories tracked by the London Metal Exchange (LME). Indonesia's nickel production is a key factor determining the price trend for the metal next year.
The Indonesian government is expected to control supply by tightening the issuance of mining quotas (RKAB). In addition to tightening mining quotas to manage supply, it was previously reported that the Ministry of Energy and Mineral Resources also plans to revise the nickel ore benchmark price formula in early 2026.
Meidy Katrin Lengkey, Secretary General of the Indonesian Nickel Miners Association (APNI), revealed that a key point of the revision is that the government will begin treating nickel-related minerals, particularly cobalt, as separate commodities and impose royalties on them.