What's Holding Back Nickel Prices in 2026? Market Fundamentals Point to Continued Weakness

The nickel price narrative heading into 2026 tells a familiar story: oversupply continues to dominate, while demand growth stumbles. Throughout 2025, nickel traded around US$15,000 per metric ton, constrained by structural headwinds that show little sign of easing. Understanding what shapes the nickel price in the year ahead requires examining three critical factors: demand destruction in key end-markets, policy shifts undermining energy transition momentum, and the persistent supply overhang that has reshaped the entire market structure.

The Demand Crisis: Why Traditional Nickel Demand Is Weakening

The biggest surprise to nickel watchers hasn’t been supply growth—it’s been the collapse in demand from sectors that were supposed to drive consumption. Stainless steel, which accounts for over 60 percent of global nickel use, depends heavily on Chinese construction activity. But China’s housing market remains broken. November 2025 sales fell 36 percent year-over-year, with cumulative declines of 19 percent through the first 11 months. Even as Beijing attempted stabilization measures throughout 2024 and 2025, the sector has failed to recover from its 2020 collapse. Without a property sector turnaround, stainless steel demand—and by extension, nickel price support—will remain weak.

More troubling for nickel bulls is the shift happening in EV battery chemistry. For years, nickel-manganese-cobalt (NMC) batteries were positioned as the premium option, offering higher energy density and driving range advantages. Then lithium-iron-phosphate (LFP) technology advanced rapidly. Vehicles using LFP now achieve ranges exceeding 750 kilometers, erasing the chemistry gap while offering lower production costs and superior safety profiles. The data tells the story: in September 2025, nickel battery demand rose just 1 percent year-over-year, while LFP demand climbed 7 percent. Most concerning, recent policy shifts have accelerated this trend. The elimination of the US EV tax credit in September cratered American EV sales—dropping 46 percent in Q4 compared to Q3, and down 37 percent year-over-year. Ford Motor scaled back EV investments with a US$19.5 billion writedown, while the EU abandoned its 2035 internal combustion engine phase-out target. These moves signal a slowdown in energy transition policies that directly undermines nickel’s growth thesis.

Supply Pressures: Why Indonesian Production Remains the Wild Card

Indonesia’s role in depressing the nickel price cannot be overstated. The nation produces roughly 2.2 million metric tons annually—a staggering 2.75x increase from the 800,000 MT produced in 2019. In February 2025, Jakarta adjusted its quota system, raising nickel ore output capacity to 298.5 million wet metric tons from 271 million WMT in 2024. The result: London Metal Exchange nickel stockpiles ballooned to 254,364 MT by late November, up from 164,028 MT at year-start.

These supply levels have pushed the nickel price dangerously close to the profitability floor for Indonesia’s lowest-cost miners. By November, nickel had sunk to US$14,295. This price pressure raises an intriguing question: will Jakarta actually cut production in 2026? According to Shanghai Metal Market sources, Indonesian officials are considering reducing ore output to roughly 250 million MT—a significant drop from 379 million WMT targeted in 2025. However, discussions remain preliminary, and final targets haven’t been locked in.

Even if cuts materialize, ING commodities strategist Ewa Manthey cautions they may not move the needle much. “The global market is still forecast to remain in surplus—around 261,000 MT in 2026—so further cuts would need to be significant to alter fundamentals.” She notes that Indonesia may prefer a wait-and-see approach as two new policies take effect: a dynamic royalty structure (14-18 percent, depending on nickel price levels) introduced in April 2025, and shortened mining license validity (cut from three years to one year) implemented in October. These mechanisms give Jakarta greater production control without committing to immediate cuts.

The Price Forecast: Why US$16,000 Remains a Ceiling

What would it take to materially improve the nickel price outlook? Significant supply coordination. Indonesian officials have indicated their preferred range sits between US$18,000 (to avoid EV battery maker substitution) and US$15,000 (to protect smelter profitability). Western producers, by contrast, need sustained prices above US$20,000 to justify continued operations—they began cutting back in 2024 when LME prices averaged US$16,812. Getting to that level would require erasing most or all of the projected surplus—a scale in the hundreds of thousands of metric tons that seems unlikely without coordinated action.

Manthey’s baseline forecast suggests the nickel price will struggle throughout 2026. “We expect prices to struggle to hold above US$16,000 given the surplus. Sustained levels above US$19,000 look unlikely under current fundamentals. We see prices averaging US$15,250 in 2026.” This aligns with the World Bank’s 2026 outlook of US$15,500, potentially rising to US$16,000 in 2027. Russia’s Nornickel, one of the world’s largest nickel producers, forecasts a market surplus of 275,000 MT of refined nickel in 2026—reinforcing the bearish case.

Upside risks exist but appear limited. Unexpected supply disruptions or stronger-than-forecast demand from stainless steel and battery applications could support prices, but current fundamentals don’t support meaningful recovery. Until structural changes shift market dynamics, the nickel price appears destined for continued pressure through 2026 and potentially beyond.