Geopolitical disruptions, resource nationalism and an escalating power crunch are reshaping global base metals markets, according to a Wood Mackenzie analysis presented at the Wood Mackenzie LME Forum in London on 21 October 2026. Within this framework, the nickel market is returning toward balance in 2026 after several years of oversupply. However, Wood Mackenzie says this headline stability masks a deep structural split between Class I and Class II nickel.
According to the analysis, global refined nickel output is contracting by 2%, which Wood Mackenzie describes as the first annual decline since 2015. The Class II segment, which includes Indonesian NPI, faces widening deficits from 2027. Wood Mackenzie attributes this to Indonesian NPI production consolidating below its 2025 peak under the weight of tighter RKAB mining quotas, falling ore grades and recent El Niño-related drought disruptions.
Wood Mackenzie reports that Chinese stainless steel mills are structurally increasing their use of scrap and Class I cathode in melt mixtures to hedge against shrinking NPI availability. By contrast, the Class I and chemical segments face ongoing surplus, driven by expanding Indonesian HPAL projects and Chinese refining capacity. The analysis also notes that localised sulphur supply constraints and power bottlenecks continue to present operational risks to new project delivery.
The nickel outlook is set against a broader demand backdrop linked to AI infrastructure. Wood Mackenzie is tracking more than 250 GW of data centre projects globally, over three times the pipeline a year ago. The firm states that transmission networks, substations and dedicated power generation can require three to four times more metal than the facilities they support.
At the same time, upstream investment is lagging. Wood Mackenzie notes that project sanctioning remains below expectations despite elevated commodity prices, as permitting delays, geopolitical uncertainty and project complexity weigh on decisions. Lindsay Grant, Vice President of Metals and Mining Research at Wood Mackenzie, said: "High prices should trigger investment, yet project sanctioning remains below expectations.
Without faster approvals and investment commitments, the industry cannot deliver the mine supply needed to support future growth." Grant added that, across copper, aluminium, nickel and lithium, future supply depends on investment decisions being made today. The release also covers other base metals in brief. Wood Mackenzie reports that US stockpiling and trade policy have pushed copper inventory cover above 170 days domestically, while the rest of the world has 48 days and a 450 kt deficit.
For aluminium, attacks in the Middle East damaged two of the world's largest smelters, and the 2026 balance is projected to be in a 1 Mt deficit. On batteries, Wood Mackenzie expects LFP to dominate the mass battery market through 2030, driven by Chinese exports, rapid gigafactory expansion and advances in charging speed. The release does not quantify the implications of this chemistry shift for nickel demand, nor does it include nickel price forecasts or LME and SHFE price data.
Source: Wood Mackenzie press release, woodmac.com, "Geopolitical supply shocks and AI power crunch collide across global base metals."
Source: woodmac.com