The International Nickel Study Group (INSG) has released a new market forecast indicating that global nickel supply will shift from a surplus of 283,000 tons in 2025 to a deficit of 32,000 tons in 2026, marking a fundamental turning point driven by stricter mining regulations in Indonesia. However, the INSG noted that this projection remains subject to uncertainty, with key variables including fluctuations in Indonesian nickel output and the ongoing impact of Middle East conflicts.
As the dominant force in global nickel supply, Indonesia’s policy adjustments are a primary driver of this reversal. The country’s approved nickel mining quota for 2026 has been significantly reduced compared to 2025, with the quota for Weda Bay Nickel—the world’s largest nickel mine—slashed by 71.4%, directly affecting approximately 13% of global nickel ore supply. Despite this, the quota is not fixed and may be revised upward upon application by quota holders, pending the Indonesian government’s supply-demand assessment, offering some flexibility to market supply.
Beyond mining quotas, Indonesia’s revised benchmark pricing mechanism, effective April 15, further influences nickel market costs and trade patterns. The new system raises base prices for all ore grades and, for the first time, includes associated minerals such as cobalt, iron, and chromium in the pricing formula. Previously, byproducts like cobalt were often treated as "free" materials and excluded from trade pricing and taxation. This adjustment is expected to increase mining costs, promote more market-driven and standardized nickel pricing, and provide underlying support for global nickel prices.
On the supply side, INSG estimates that global primary nickel production will decline by approximately 4.25% in 2026, falling from 3.88 million tons in 2025 to 3.715 million tons. This projection does not account for potential production disruptions, which could widen the deficit if Middle East tensions affect energy supplies or nickel transport. Indonesia, which accounts for about 70% of global nickel supply, will play a decisive role in determining the final scale of nickel availability in 2026.
Despite challenges in the power battery sector, overall nickel demand continues to grow. INSG projects that global primary nickel usage will increase by 4.2% in 2026, rising from 3.596 million tons in 2025 to 3.747 million tons. Growth is primarily driven by expansion in the stainless steel industry, which remains the core source of nickel demand. Although nickel’s role in batteries has been overshadowed by lithium iron phosphate batteries—which now account for over 70% of power battery installations—the overall growth of the new energy vehicle sector continues to support nickel demand, particularly for chemical nickel products like nickel sulfate.
Industry analysis suggests that the execution of Indonesia’s policies will be the central factor shaping the global nickel market in 2026. With Indonesian smelters requiring approximately 340–350 million tons of nickel ore but only 250–260 million tons approved under the 2026 quota, a significant supply gap exists. Even if Indonesia imports nickel ore from the Philippines to bridge the shortfall, it may not fully meet demand, potentially forcing the closure of some high-cost smelting capacity. Other factors, including Middle East conflict impacts on energy and shipping, as well as the pace of stainless steel industry expansion, will also influence nickel market balance.
Nickel prices have already shown volatility due to expectations of a supply-demand reversal and may maintain a relatively strong trend in the short term. Market observers suggest that if Indonesia’s quota adjustments fall short of expectations, production disruptions occur, or stainless steel demand exceeds forecasts, the global nickel deficit could widen further, pushing prices upward. Conversely, a larger-than-expected quota increase or weaker demand could narrow the gap.
Moving forward, close attention should be paid to Indonesia’s nickel ore quota adjustments, the implementation of its benchmark pricing mechanism, and key variables such as Middle East tensions and stainless steel operating rates to guard against market risks arising from supply-demand fluctuations. The INSG has committed to continue monitoring global nickel market developments and updating its forecasts accordingly.