What Determines Nickel Prices in 2026? Understanding the Supply-Demand Imbalance

The nickel market faces a persistent headwind: how much does a nickel cost tells only part of the story. Throughout 2025, nickel hovered around US$15,000 per metric ton, with prices struggling to gain momentum. The underlying issue isn’t mysterious—Indonesian mining operations have flooded global markets with record volumes, while traditional demand drivers have weakened considerably.

The Indonesian Supply Problem

Indonesia’s dominance in global nickel production has become both a blessing and a curse for price stability. The country produced roughly 2.2 million metric tons in 2024, compared to just 800,000 MT in 2019, demonstrating explosive growth that has reshaped market dynamics. This February, authorities raised ore extraction quotas to 298.5 million wet metric tons (WMT) from the previous 271 million WMT, a move ostensibly designed to ease supply pressure—though the outcome proved counterintuitive.

The consequence was immediate: London Metal Exchange warehouses saw stockpiles balloon to 254,364 MT by late November, up sharply from 164,028 MT at year start. As inventory accumulated, prices plummeted to US$14,295, approaching the profitability floor for low-cost regional producers. This prompted speculation about potential production cuts. Shanghai Metal Market reports that the Indonesian government is mulling a reduction to around 250 million MT in 2026, though negotiations remain fluid.

However, not all analysts expect dramatic restraint. Ewa Manthey, commodities strategist at ING, argues that Indonesia may hold course given new policy frameworks introduced in 2025. A revised royalty structure (14-18 percent based on price tiers) and shortened mining license validity (from three to one year) grant the government greater control without necessarily cutting volumes. As Manthey noted, “The global market is still forecast to remain in surplus — around 261,000 MT in 2026 — so further cuts would need to be significant to alter fundamentals.”

Demand Headwinds: Construction and EV Market Challenges

Beyond oversupply, nickel demand itself is struggling. The metal’s primary application—stainless steel production—depends heavily on China’s construction sector, which remains depressed following the 2020 property collapse. November property sales dropped 36 percent year-over-year, with cumulative declines of 19 percent through the first eleven months. Even supportive government measures haven’t reversed the trajectory, keeping stainless steel demand—which accounts for over 60 percent of global nickel consumption—muted.

The electric vehicle battery market presents another complication. While nickel production surged over the past five years to fuel EV demand, battery chemistry preferences have shifted dramatically. Major manufacturers like Contemporary Amperex Technology (SZSE:300750, HKEX:3750) have increasingly adopted lithium-iron-phosphate (LFP) technology instead of traditional nickel-manganese-cobalt formulations. Recent advances have closed the performance gap, with LFP vehicles now achieving ranges exceeding 750 kilometers, while offering cost and safety advantages.

Data illustrates the trend: September 2024 saw nickel battery demand grow just 1 percent year-on-year, while LFP demand climbed 7 percent. To compound these concerns, EV market momentum itself has softened. After the US eliminated its EV tax credit in September, quarterly sales dropped 46 percent quarter-over-quarter and 37 percent annually. Ford Motor (NASDAQ:F) slashed EV investment by US$19.5 billion, pivoting toward hybrids and extended-range vehicles. Meanwhile, the EU abandoned its 2035 internal combustion engine ban, further dampening long-term battery metal demand expectations.

Price Outlook: Continued Pressure Expected

Consensus forecasts paint a subdued picture. ING expects nickel to struggle holding above US$16,000, with an average price around US$15,250 in 2026. The World Bank projects US$15,500 for 2026, rising modestly to US$16,000 in 2027. Russia’s Nornickel anticipates a global surplus of 275,000 MT of refined nickel, reinforcing structural headwinds.

To meaningfully move prices higher would require coordinated supply restrictions of unprecedented scale—hundreds of thousands of metric tons—or unexpected demand catalysts. Current fundamentals offer neither. As Manthey explained, “To push prices to that range, cuts would need to be deep enough to erase most of the projected surplus. Even then, investor sentiment would probably require sustained prices above US$20,000 to materially improve producer attractiveness.”

Until market dynamics shift materially, nickel investors and producers should prepare for extended pressure. The combination of persistent supply abundance, weak construction demand, and EV battery substitution suggests that how much does a nickel cost will remain constrained in the near to medium term, with structural recovery unlikely without significant external intervention.