LME Nickel Stocks up 180 MT to 267,522 MT

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Nickel: awaiting more news from Indonesia but

don't expect a surprise relaxation

LME nickel prices had a strong start to 2026, rising from just near

$15,000/t in December 2025 to above $19,000/t in early April based on

announcements of reduced mining quotas (RKABs) in Indonesia. Fuel was

added to the fire by a cessation in sulphur exports from the Middle East

from February (75% of Indonesian sulphur supply used in part of Indonesian

nickel production) and an explosion in spot sulphur prices.

However, a large sell-off took prices back towards $16,000/t in early July as

it appeared from certain press reports that ore quotas would sharply be

Figure 1 - Nickel prices NPI and sulphate outperform LME

increased in the second half of 2026. A reopening of the Strait of Hormuz in

June also appeared to signal an easing of the sulphur shortages some time

towards the end of 2026.

The price sell-off took prices below the break-even levels for the sulphur-

using production (MHP produced from HPAL plants). Statements from the

Indonesian government denied the press reports of a significant easing in

quotas and the Strait of Hormuz has closed again. Prices have subsequent

rallied back above $17,000/t.

Recently-released data from the Indonesian government (from their

SIMBARA system, reported by APNI) shows a significant fall in nickel ore

production in Jan-June to only 120mt, which we estimate is down around

6% YoY. Even assuming a signifiant increase second-half quotas (RKABs), it

seems unlikely that total 2026 production could get even close to 300mt,

let alone the rumoured (but denied) increase in quotas to as high as 360mt

Source: LME, FAN, SMM, Macquarie Strategy, July 2026

(vs. previously announced levels of 260-270mt).

All signs from the market remain indicative of a removal of the previous

Sharp fall in Indonesian nickel ore supply in 2026

over-supply from the market, especially outside China, where total supply

appears to have fallen sharply year-on-year (amid booming Chinese

consumption and stocking). LME stocks look likely to fall significantly during

the second half of the year if present trends continue and place upward

pressure on LME prices.

The strongest segments of the market is the so-called class 2 nickel-iron

(nickel pig iron and ferronickel) and nickel sulphate, reflecting exceptionally

strong demand growth in the Chinese production of stainless steel and

battery materials (PCAM) this year Sulphate prices have risen to a strong

premium to LME prices this year and discounts for nickel pig iron and

ferronickel have narrowed significantly.

Chinese stainless steel mills and battery makers have sharply increased

their orders and use of class 1 nickel for the first time in several years due

All signs point to a tightening nickel market, especially for sulphate and NPI/FeNi

LME nickel prices had a strong start to 2026, rising from just near $15,000/t in December 2025 to above $19,000/t in early

April based on announcements of reduced mining quotas (RKABs) in Indonesia. Fuel was added to the fire by a cessation

in sulphur exports from the Middle East from February (75% of Indonesian sulphur supply used in part of Indonesian nickel

production). An explosion in spot sulphur prices and an increase in Indonesian ore prices in April also drove nickel costs for

Indonesian MHP producers to close to $20,000/t at the margin for a while (they are now back in the $16-18,000/t basis LME

range).

However, a large sell-off took prices back towards $16,000/t in early July as it appeared from certain press reports that

ore quotas would sharply be increased in the second half of 2026. From levels of 260-270mt previously indicated by the

Indonesian government, a Bloomberg report said that quotas could be raised to as high as 360mt. A denial of this by the

government, did not convince the market. A reopening of the Strait of Hormuz in June also appeared to signal an easing of

the sulphur shortages some time towards the end of 2026, adding further fuel to the sell-off fire.

The price sell-off took prices below the break-even levels for the sulphur-using production (MHP produced from HPAL plants).

Statements from the Indonesian government denied the press reports of a significant easing in quotas and the Strait of

Hormuz has closed again.

Over the past week, LME prices have subsequent rallied back above $17,000/t. Amid the volatility in LME metal prices, the

price of nickel pig iron (NPI) has rallied strongly. NPI has borne the brunt of Indonesian supply cuts and Chinese Jan-June

imports of NPI from Indonesian fell almost 10% YoY, while stainless production was up around 6% YoY over the same period

(Fig 4). Despite increased imports of ferronickel, higher domestic Chinese nickel production and higher used of recycled

stainless steel scrap, there is now a shortage of Nickel-iron units and stainless mills in China and Indonesia have reported

sharply increased their use of the most expensive nickel units, class1 nickel cathode.

Similarly, booming demand for nickel sulphate to make ternary precursors for the battery market (Fig 5) has seen nickel

sulphate prices rise to a sustained premium to LME prices for the first time in many years

Answer to today's trivia question: The Femur