Nickel’s Turning Point
Unlocking Nickel’s Potential – The 2026 Rebound Thesis
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Investment Thesis
Nickel, once buried under Indonesian oversupply, is staging a remarkable turnaround in early 2026. Prices have rallied explosively from mid-December 2025 lows around $14,200/ton to current LME levels near $17,400–$17,500 (with peaks above $18,900 in January), fueled by Indonesia’s aggressive supply management—slashing mining quotas (RKAB) to 250–260 million wet tons for 2026 from 379 million in 2025, a roughly 30–34% cut. This policy pivot, aimed at supporting prices, government revenue, and curbing environmental damage, marks a shift from flooding the market to value maximization.
For long-term disciplined investors willing to accumulate during periods of volatility, the setup remains compelling: structural demand from EVs, stainless steel, and alloys collides with constrained supply and geopolitical pushes for diversified (Western/non-Indonesian) sources. While short-term surpluses may linger in some forecasts, the trajectory points to tightening fundamentals and potential price upside toward $20,000+/ton if cuts hold and demand accelerates.
Nickel’s Industrial Importance and Uses
Nickel remains essential for:
Stainless Steel Production (~68% of demand): Corrosion resistance in appliances, construction, automotive, and infrastructure—steady growth in emerging markets.
Alloys and Superalloys: High-strength applications in aerospace, turbines, and offshore rigs.
Batteries (~17–20%+ and rising): NiMH, NiCd, and especially lithium-ion (NCM/NCA cathodes) powering EVs, renewables storage, tools, and electronics. EV adoption continues robustly, with battery-grade nickel demand projected to grow 20–25%+ annually through the decade despite some shifts to LFP chemistries.
Other: Electroplating, electronics, medical tools, catalysts, coins.
Market Dynamics and Strategic Importance
The narrative has flipped in 2026. Indonesia (~65% of global supply) dominated with low-cost laterite output (NPI/HPAL), creating a glut that depressed prices below many producers’ costs. But profitability pressures, environmental crackdowns, and policy reversals have triggered supply discipline: Mining permits curtailed, new HPAL/NPI plants restricted, and quotas slashed to stabilize prices. This has sparked a virtuous cycle—prices up ~$4,000/ton since December, ore grades declining (requiring more volume for same output), and seasonal/Philippine lows compounding tightness.
Geopolitically, U.S./Western tariffs, supply diversification away from Indonesia, and ethical sourcing premiums favor non-Indonesian projects.
Risks to Consider
Lingering Oversupply: If Indonesian cuts underdeliver or new capacity ramps unexpectedly, surpluses could cap gains (some 2026 forecasts still see ~200–300kt surplus).
Economic Slowdowns: Weaker stainless steel or delayed EV rollout could soften demand.
Volatility from Trade/Geopolitics: Ongoing tensions could swing prices sharply. A disciplined, long-term accumulation strategy—dollar-cost averaging during dips—mitigates these while capturing the rebound potential.
Nickel Ore Types
Sulphide Ores: Lower processing costs, higher mining costs (underground), rich by-products (copper, cobalt, PGMs, gold). Attractive margins and diversification.
Laterite Ores (Indonesia-dominant): Lower mining costs (open-pit), higher processing (energy/chemical-intensive HPAL). Fewer by-products; technical challenges persist, but improvements ongoing. Declining grades in Indonesia amplify supply constraints. Sulphides offer better economics long-term; laterites drive current dynamics but face headwinds.
The Dark Side of Nickel Mining
Indonesia’s boom has exacted heavy costs: deforestation, toxic waste (e.g., chromium-6 contamination), and labor issues. As sustainability rises in priority—driven by investors, regulators, and end-users (e.g., EV OEMs)—ethical/Western-sourced nickel could command widening premiums, accelerating the shift and supporting price recovery.
Conclusion
Indonesia’s discipline, combined with EV/electrification momentum and diversification needs, creates asymmetric opportunity. Accumulate methodically now—prices have already rewarded early movers, but structural tightening suggests more upside ahead.
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