Nickel prices climbed above $16,000 per tonne on the London Metal Exchange (LME) as the prospect of production cuts by Chinese producers in Indonesia raised hopes of tighter supply, according to CarbonCredits.com. The rally marked a fourth consecutive day of gains after prices hit a nine-month low, giving the metal some relief from persistent oversupply concerns. Nickel rose as much as 2.7% on October 21 before trading 2.1% higher at $16,005 per tonne, narrowing the metal's decline for 2026 to less than 4%.
Bloomberg reported that the price recovery reflects growing expectations that producers could reduce output to address weak prices and rising operating costs. Executives from several major Chinese producers are reportedly considering potential output curbs at their Indonesian operations, which include high-pressure acid leaching (HPAL) plants that produce mixed hydroxide precipitate (MHP), an intermediate material used to manufacture battery chemicals. A previous attempt to agree on reductions in August failed to produce a deal.
Gao Yin, an analyst at Shuohe Asset Management, told Bloomberg that the production reductions being discussed in the market were significant. Nevertheless, the global nickel market still faces a supply surplus, and the strength of the rally will depend on whether proposed cuts become actual reductions. Trading Economics has pointed to short-covering as a factor supporting the recovery, a process in which traders buy back nickel contracts to close bets on falling prices, adding to buying pressure.
Indonesia is the world's largest nickel producer, so changes in its output can affect global supply and prices. The LME nickel price curve, as cited by CarbonCredits.com, shows higher prices for contracts with longer delivery dates, rising from around $15,900 per tonne for immediate delivery to approximately $18,400 per tonne for December 2029. The article notes that the curve reflects current market pricing rather than a guaranteed forecast.
Indonesia's nickel industry faces pressure from weaker selling prices, rising costs and tighter mining quotas. Under its annual work plan and budget system, known as RKAB, the country approved a lower nickel ore production quota for 2026 than for 2025. The International Nickel Study Group (INSG) noted that Indonesia's quota decisions take supply and demand conditions into account.
Applications for 2027 quotas are due by November 15, 2026. Weather-related disruptions have added to supply risks. Bloomberg reported that water shortages linked to El Niño forced nickel smelters at the Morowali Industrial Park to reduce nickel pig iron (NPI) production, with a potential impact estimated at 100,000 tonnes.
NPI is a lower-grade nickel product primarily used in stainless steel production, while potential cuts at HPAL facilities could affect nickel intermediates used in battery manufacturing. According to the International Energy Agency (IEA), low prices continued to weigh on nickel production outside Indonesia, with mined output falling by over 10% and refined production declining by nearly 3%. Despite the recent gains, the INSG's October outlook expects the global nickel market to remain in surplus.
The group revised its 2026 forecast from a 32,000-tonne deficit in April to a 19,000-tonne surplus, which would have been the first annual supply shortfall since 2021 under the earlier projection. The INSG also expects a surplus of 70,000 tonnes in 2027, and cautioned that its production estimates do not account for an adjustment factor for potential supply disruptions, meaning actual output could differ from the forecast. Demand is driven largely by stainless steel and rechargeable batteries.
According to the World Stainless Association, global stainless steel melt shop production rose 5% year over year in the first half of 2026, and the INSG expects further expansion in the second half of this year and throughout 2027. The IEA expects batteries to account for 30% of total nickel consumption by 2035, driving nearly two-thirds of demand growth, with demand likely to come mainly from battery makers outside China, particularly in North America and Europe. However, the growing adoption of lithium iron phosphate (LFP) batteries, which do not require nickel, could limit demand for battery-grade nickel.
For now, nickel prices will depend on whether Indonesian production cuts materialise, on Indonesia's mining quotas, and on demand from stainless steel and battery makers. Without lower supply or stronger demand, the recent rally may prove short-lived. Sources: CarbonCredits.com (article by Saptakee S.), citing Bloomberg, the London Metal Exchange (LME), Trading Economics, the International Nickel Study Group (INSG), the International Energy Agency (IEA) and the World Stainless Association.
The Northern Miner was also referenced in the original article.
Source: carboncredits.com