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Nickel has pushed its way back into the commodities conversation in early 2026. A shift in Indonesia’s supply settings and improving investor sentiment have helped steady a market that spent the last few years weighed down by oversupply and falling prices. While recent policy changes have tightened the short-term picture, the longer-term drivers behind nickel remain firmly in place.

Nickel is one of the more geopolitically sensitive base metals. With supply heavily concentrated and demand evolving through stainless steel and battery growth, pricing is increasingly shaped by government policy as much as industrial cycles.

Short-Term Outlook

Indonesia dominates global nickel production and refining. Over the past three years, rapid expansion of laterite production and downstream capacity created a clear surplus, pressuring prices and forcing higher-cost producers to scale back.

That dynamic is now shifting.

Indonesia has reduced 2026 mining quotas, tightened licensing and placed greater focus on domestic value-add. After a period of accelerated ore depletion and softer grades, the move looks aimed at stabilising pricing and protecting long-term reserves.

Markets reacted quickly. Nickel prices lifted following the announcement, highlighting how sensitive global balances are to Indonesian policy. Supply in nickel is no longer driven purely by cost curves, it is increasingly shaped by government settings.

In the near term, this supports a more stable pricing backdrop. Clear supply discipline lowers the risk of renewed oversupply and restores confidence across the sector. Volatility will remain, particularly given exposure to Chinese stainless demand, but the market appears more balanced than it has in some time.

Long-Term Outlook

Beyond the immediate policy adjustments, the longer-term investment thesis for nickel remains anchored in three primary pillars:

1. Stainless Steel Demand

Stainless steel continues to represent the largest end-use segment for nickel. Urbanisation, infrastructure expansion and industrial development across Asia provide an enduring baseline demand profile. Stainless demand growth alone supports steady structural consumption.

2. Battery-Grade Nickel and Electrification

The transition to electrification is reshaping the composition of nickel demand. High-nickel cathode chemistries in lithium-ion batteries require Class I nickel, driving increased focus on higher-grade supply chains. While battery chemistry continues to evolve, premium nickel remains critical for high-energy-density applications and long-range electric vehicles.

As global EV penetration continues to expand, securing reliable, ESG-compliant nickel supply becomes increasingly strategic. Jurisdictional diversification is likely to remain a priority for Western manufacturers.

3. Strategic Supply Chain Rebalancing

Nickel’s inclusion on critical minerals lists across several developed economies reflects its strategic importance. Government support, bilateral agreements and financing initiatives continue to favour domestic processing and alternative supply hubs outside of Southeast Asia.

Australia holds significant nickel reserves yet contributes a smaller proportion of global output relative to Indonesia. Investment in higher-grade sulphide resources and downstream processing capacity may position Western producers as a complementary supply base over the medium to long term.

The BPC View

Indonesia’s quota adjustments have changed the short-term tone in nickel. Greater supply control has improved balance in the market and brought renewed attention back to the sector.

Looking further out, stainless demand and electrification continue to provide structural support. High-grade, ESG-aligned supply is likely to attract increasing strategic value as supply chains diversify.

Investors should view current conditions as part of an evolving structural phase rather than a short-lived trading bounce. Policy discipline in Indonesia, combined with sustained industrial demand growth, provides a framework for improved price support over the coming cycle.

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