Key Signal:
The trajectory of global nickel prices is increasingly hostage to policy
clarity from Indonesia. Without concrete details on 2026 production quotas, the
recent rally has begun to lose momentum, exposing the market’s dependence on
regulatory signals rather than structural demand shifts.
Receh.in — Indonesia accounts for roughly 70 percent of global nickel output, equivalent to approximately 3.8 million metric tons per year. This dominant position places Jakarta at the center of global supply balance calculations.
Since the government floated plans in December 2025 to curb nickel production, prices have surged more than 30 percent. This week, nickel briefly touched US$18,800 per ton, the highest level in 19 months, before retreating to around US$18,000 per ton.
The pullback accelerated as markets failed to receive follow-through on policy details. On Wednesday (January 7), three-month nickel futures on the London Metal Exchange (LME) plunged as much as 5.9 percent, closing down 3.4 percent. By Thursday’s close, prices had slipped a further 4.1 percent to US$17,155 per ton.
Policy Signal: Intent Without Execution
The Indonesian government has repeatedly signaled its intention to rein in nickel output to restore global supply-demand balance. However, the Ministry of Energy and Mineral Resources (ESDM) has yet to disclose the 2026 mining quotas under the Work Plan and Budget (RKAB) framework.
Energy Minister Bahlil Lahadalia has stated that quota figures remain under finalization. In the absence of technical clarity—particularly on the depth and enforcement of production cuts—markets have begun to question the durability of the policy-driven rally.
This uncertainty has become the primary drag on prices, outweighing earlier optimism tied to Indonesia’s regulatory leverage.
External Pressure: Investment Risk
Analysts warn that Indonesia’s room to maneuver may be narrower than headline dominance suggests. Macquarie analyst Jim Lennon notes that pressure to dilute production curbs will intensify, especially as multiple new projects come online in 2026.
“Cutting quotas is effectively telling Chinese companies that have already built facilities that they cannot operate them,” Lennon said, as quoted by Reuters. “That would undermine future investment prospects.”
This dynamic highlights a structural tension: balancing price stabilization against the risk of discouraging capital inflows into downstream processing and smelting capacity.
Inventory Overhang Persists
Beyond Indonesia’s policy stance, global supply pressures remain unresolved. Nickel inventories in LME-approved warehouses have surged more than 300 percent since early 2025, reaching 275,634 tons.
Off-warrant stocks—material that could potentially enter the LME system—stand at 112,028 tons, nearly double levels recorded at the end of October 2025. This latent supply acts as a ceiling on sustained price appreciation, particularly in the absence of confirmed production cuts.
Diverging Views on the Outlook
Despite recent weakness, not all analysts believe the rally has run its course.
Nickel plays a critical role in electric vehicle batteries and stainless steel production, contributing roughly 12 percent of Indonesia’s total exports and supporting large-scale employment. Recent price strength has also been underpinned by renewed buying from China amid rising global geopolitical tensions.
MNC Sekuritas research analyst Raka Junico projects that nickel prices may bottom in 2026 before rebounding, as the pace of new processed supply additions slows and begins to bite in 2027.
Combined nickel inventories across LME and Shanghai exchanges rose 29 percent year-to-date as of September 2025 to 253,000 metric tons, but Raka argues that emerging supply discipline could gradually tighten the market.
Indonesia’s shift from a three-year RKAB quota system to an annual framework is seen as an early step toward stricter supply control. While this transition may introduce short-term operational friction for miners, its broader signaling effect is considered constructive.
Strategic Read-Through
Indonesia, as the world’s largest nickel producer with an estimated 21 percent share of global output, retains significant influence—provided policy execution matches intent.
Kiwoom Sekuritas Head of Research Liza Camelia Suryanata notes that the current price rebound is partly structural, driven by tighter RKAB discipline and gradual normalization of global inventories. However, short-term volatility will remain elevated until regulatory clarity improves.
From an equity perspective, the key beneficiaries of a sustained uptrend will be producers with low cost structures, clear permitting status, and flexible product portfolios, rather than marginal or highly leveraged operators.
Bottom Line
Nickel prices are no longer responding to demand narratives alone. They are trading on policy credibility.
Until Indonesia translates its production-cut rhetoric into enforceable quotas, price action is likely to remain volatile and prone to sharp corrections. The next decisive move in nickel will hinge less on China or inventories—and more on whether Jakarta delivers clarity or compromise.
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