Nickel

What Is Nickel

Nickel is element 28 — a hard, silvery-white metal with a faint golden tinge, defined by two properties that place it inside applications where failure is not acceptable: resistance to corrosion and oxidation at high temperatures, and the ability to harden and strengthen other metals when alloyed with them.

The dominant use — approximately 60–65% of all nickel consumption — is stainless steel (steel alloyed with nickel and chromium to resist rust and corrosion). Every stainless steel pipe in a chemical plant, every surgical instrument in a hospital, every food-grade container, every architectural facade that resists weather contains nickel. The second major use is specialty alloys for aerospace, power generation, and industrial equipment where components must maintain structural integrity at temperatures that would destroy conventional steel. The third use — and the one that drove the most attention and investment over the last decade — is rechargeable batteries, specifically the NMC cathode chemistry (nickel-manganese-cobalt — a battery formulation that uses significant quantities of nickel to achieve high energy density) used in electric vehicle batteries.

That third application was supposed to be nickel's defining demand story for the 2020s and 2030s. It has become more complicated. Battery manufacturers and automakers, particularly in China, have increasingly shifted to LFP (lithium iron phosphate — a battery chemistry that uses no nickel and no cobalt, is cheaper to produce, and is adequate for most vehicle applications). NMC's share of the Chinese EV battery market fell from 25% in 2024 to 18% in the first nine months of 2025. The demand story that justified a decade of nickel investment in Indonesia is being partially rewritten in real time.

Where It Comes From

Indonesia is the story. The country accounts for approximately 65–70% of global nickel supply — a share that grew from roughly 30% in 2019 to dominance today, driven by a deliberate government policy of banning raw ore exports in 2020 and forcing downstream processing to happen on Indonesian soil. The result was an explosion of Chinese-backed nickel processing capacity in Indonesia — particularly for NPI (nickel pig iron — a lower-purity nickel product made in blast furnaces, used primarily in stainless steel) and MHP (mixed hydroxide precipitate — a battery-grade intermediate nickel product). China effectively built its nickel supply chain inside Indonesia, processing Indonesian ore with Chinese capital and technology.

The other significant producers — Russia (Norilsk Nickel, the world's largest high-grade nickel producer), Canada, Australia, the Philippines, and New Caledonia — collectively account for the remaining 30–35% of global supply. Many of these higher-cost Western operations have struggled badly under the low-price environment that Indonesian expansion created. Australian nickel mines shut down. New Caledonian operations entered financial distress. The Western nickel supply chain, which produces the higher-purity Class 1 nickel (refined nickel metal above 99.8% purity — the grade that trades on the LME and that batteries and specialty applications prefer) contracted sharply.

What Indonesia built was primarily Class 2 nickel — lower-purity forms suitable for stainless steel and bulk industrial uses. The distinction matters because LME inventories, which hold Class 1 deliverable nickel, have swelled to 287,550 tonnes — up 44.2% year over year. LME warehouses are the dumping ground for Class 1 that the stainless steel industry does not want at current prices. The inventory overhang is a physical ceiling on price recovery.

Indonesia's response to the oversupply it created: production quotas. The 2026 RKAB quota (Rencana Kerja dan Anggaran Biaya — Indonesia's annual mining work plan and budget approval system, through which the government sets and can revise production allocations) is set at approximately 260–270 million tonnes of ore — down sharply from the 379 million tonnes targeted for 2025. A 30% cut. Whether it will be enough to close a projected 261,000-tonne market surplus is contested. The consensus is that surplus persists through 2026.

Why It Matters Right Now

The immediate tension is Indonesian quota discipline. If the 2026 RKAB holds at 260–270 million tonnes, the surplus narrows meaningfully. If Indonesia issues upward revisions mid-year — as it has done before — the surplus widens and prices fall. The nickel market is trading on Indonesian policy signals more than any supply or demand fundamental. That makes it unusually vulnerable to political noise from a single government.

The demand side runs two competing narratives simultaneously. Stainless steel — still 60–65% of nickel demand — tracks global manufacturing activity broadly. Manufacturing has been sluggish, suppressing this anchor demand. The battery story is more structural and more contested. EV adoption is growing, but the chemistry is shifting. LFP batteries have taken significant share in China's EV market, the world's largest. NMC chemistry is still preferred for high-performance, long-range applications — but its market share is declining. The question of whether that shift is permanent or whether NMC regains ground in premium applications is genuinely unresolved.

The longer-term picture is more constructive than the near-term one. The analysts projecting a 2026 surplus see the market approaching balance or deficit in the late 2020s and early 2030s as EV adoption accelerates globally and high-nickel battery chemistry retains relevance for premium applications. S&P Global projects the nickel market flipping to deficit by 2032. Western governments, recognising the concentration risk in Indonesian and Chinese-controlled supply chains, are funding domestic alternatives — including Canada Nickel's Crawford project and various Australian restart programs.

The underappreciated angle on this page is different from every other mineral page on ScarceEarth. This is not a scarcity story. The bear case for nickel is structural, not temporary. LFP substitution is not a cycle — it is a chemistry shift driven by cost economics that may be permanent for mass-market EVs. If LFP continues to dominate Chinese and then global mass-market production, nickel's battery demand story is permanently smaller than the investment cycle of 2018–2023 assumed.

Jakarta Sets the Ceiling

Here is the contradiction at the center of the nickel market: the same country that created the oversupply is the only one that can fix it — and fixing it serves its own interests, not the West's.

Indonesia's decision to build Chinese-backed processing capacity at scale between 2020 and 2025 turned a balanced nickel market into a chronic surplus. Australian mines closed. New Caledonian operations failed. Western nickel supply — the higher-quality, non-Chinese-supply-chain Class 1 nickel that governments are now trying to re-establish for battery supply chain independence — was the collateral damage of Indonesia's expansion.

Now Indonesia is cutting quotas to support prices. The 2026 cut from 379 to 260–270 million tonnes is real and significant. Macquarie raised its 2026 price forecast by 18% in response. Goldman Sachs raised theirs by 16%. But the analytical community is not unanimous. ING forecasts $15,250 per tonne for the full year — below current levels — because they believe the surplus will persist even with Indonesian discipline. And critically: Indonesia has revised its quotas upward mid-year before. The market is trading a policy promise, not delivered supply reduction.

The deeper irony is structural. Indonesia's quota cuts are designed to protect Indonesian producers — primarily the Chinese-backed operations that created the oversupply in the first place. Western mine restart and development projects, the ones Western governments are funding as supply chain diversification, are trying to re-enter a market whose price ceiling is set in Jakarta to keep just profitable enough for Indonesian producers while remaining oversupplied enough to deter serious competition.

Indonesia does not want nickel at $14,500 per tonne. It does not want it at $25,000 per tonne either — that would fund the competition. The Jakarta price range is the market. Everything else is noise.

What the Price Has Done

Nickel's price history over the last four years is the most dramatic of any major industrial metal — a story of a short squeeze, a supply flood, and an attempted managed recovery.

The 2022 peak: nickel hit an all-time high of $54,050 per tonne on March 8, 2022 — a short squeeze triggered on the LME when a major Chinese producer was forced to cover a large short position (a bet that prices would fall, which instead rose sharply against them) simultaneously with supply anxiety following Russia's invasion of Ukraine. The LME suspended nickel trading and cancelled trades in one of the most controversial episodes in modern commodity market history.

The collapse: prices fell steadily through 2022, 2023, and 2024 as Indonesian supply flooded the market. NPI and MHP from Indonesian processing plants, built and operated with Chinese capital, more than offset any supply concerns from Russia. The market descended from $54,050 per tonne to a sustained range of $15,000–18,000 per tonne as the oversupply became structural rather than cyclical.

November 2025: LME nickel fell to approximately $14,550 per tonne — near a four-year low — as LME inventories surged through 2025 and analysts raised surplus forecasts. Battery demand had disappointed relative to the NMC-optimistic projections of earlier years. Western nickel operations shut down or suspended. The investment case for new non-Indonesian projects had collapsed.

Late December 2025: Indonesia's Energy Minister signalled plans to cut 2026 production quotas. LME nickel surged 6.4% in a single session. January 2026 brought the rally to a near-19-month high of approximately $18,800 per tonne as quota cut details emerged. A single-day warranting of 20,760 tonnes of nickel onto the LME on January 7 — the largest warehouse inflow since December 2019 — partially deflated the rally, demonstrating that physical inventory could absorb the enthusiasm.

February 2026: Goldman Sachs raised its 2026 forecast by 16% to $17,200 per tonne. Macquarie raised theirs by 18% to $17,750 per tonne. Prices stabilised in the $17,000–17,400 per tonne range. May 2026: LME cash sits at approximately $16,000–17,000 per tonne — down from the January high, stabilising in a range. The gap between Goldman's $17,200 forecast and ING's $15,250 forecast represents the uncertainty around Indonesian quota compliance — and nothing else.