Nickel surplus to widen through 2026: INSG outlook for miners and metals markets

INSG(

The nickel surplus to widen through 2026 is reshaping expectations for miners, traders and stainless producers worldwide. According to the latest INSG forecast, the nickel surplus to widen through 2026 will see production consistently outpace usage, even as global economic activity proves more resilient than expected. As a result, the nickel surplus to widen through 2026 is set to reach 209,000t in 2025 and 261,000t in 2026, with primary output rising to 3.81mn t this year and 4.09mn t in 2026 against usage of 3.6mn t and 3.82mn t.

Stainless demand supports nickel, but batteries lose momentum

Nickel demand remains supported by stainless steel, but battery growth has clearly cooled. Higher stainless steel output continues to underpin core nickel usage, particularly in Asia and Europe. However, battery demand has slowed as automakers and cell producers shift towards non-nickel chemistries such as LFP and accelerate plug-in hybrids over pure battery electric vehicles. Therefore, the high-growth battery narrative has softened, easing pressure on high-purity nickel sulphate demand.

Meanwhile, this demand shift is forcing producers and investors to reassess project pipelines focused on battery-grade nickel. Margins are under strain where costs are high and product mixes are heavily exposed to the EV segment. In this environment, stainless steel remains the anchor sector, but it cannot fully absorb the excess tonnes entering the system. This imbalance feeds directly into the widening surplus and keeps a lid on any sustained price rally.

Indonesia drives supply growth as others retrench

On the supply side, Indonesia remains the dominant driver despite tighter regulatory control. The government has delayed permit approvals, seized non-compliant land and punished firms that fail reclamation duties. However, the INSG believes these interventions have only created temporary disruptions, with overall Indonesian nickel output still expected to increase through 2026. This continued expansion reinforces the structural surplus and raises competitive pressure on higher-cost regions.

Outside Indonesia, weaker profitability has already forced several producers to scale back or suspend operations. In China, the shift from nickel pig iron towards more refined cathode output is forecast to continue as the industry optimises for flexibility and value. Nickel sulphate production is expected to ease in 2025 as battery demand softens, before recovering in 2026 when market conditions stabilise. For now, prices remain trapped between steady stainless demand and a widely recognised surplus in exchange-traded Class 1 inventories, with three-month nickel recently trading near $15,480/t.

Financial conditions are improving, with global inflation forecast to decline across most G20 economies by 2026. Even so, the INSG warns that tariffs and trade measures could offset some macro tailwinds by adding friction to investment decisions, supply chains and downstream demand growth. If policy risk rises, it may delay project sanctions and accelerate closures at the margin, but the current surplus path remains firmly in place.

The Metalnomist Commentary

The INSG nickel surplus outlook underscores a market where supply discipline lags structural investment made during the last bull cycle. For producers, cost reduction, product differentiation and downstream partnerships will be critical to survive a prolonged surplus. For consumers in stainless and batteries, the coming years offer a rare window to secure long-term nickel units on favourable terms before the next demand wave arrives.

Nickel Market Surplus 2025 to Reach 198,000t on Indonesian Output Growth: INSG

Nickel Factory

Surplus Widens as Global Nickel Supply Outpaces Demand

The nickel market surplus in 2025 is expected to reach 198,000 tonnes, according to the International Nickel Study Group (INSG). This marks an increase from 170,000t in 2023 and 179,000t in 2024, driven largely by continued production expansion in Indonesia across all major nickel product types. Global primary nickel production is forecast at 3.735mn tonnes, while demand lags behind at 3.537mn tonnes.

Indonesia Leads Supply Growth Despite Ore and Royalty Headwinds

Indonesia remains the engine of global nickel supply, despite recent permit issuance delays and the introduction of a new royalty regime based on the Harga Mineral Acuan, a price benchmark tied to LME nickel pricing. The full impact of these changes on mining output is still unclear. Meanwhile, China is also ramping up production of nickel cathode and nickel sulphate, although its nickel pig iron (NPI) output is expected to decline.

Mixed Demand Outlook: Stainless Steel Grows, Battery Demand Slows

The nickel market surplus in 2025 also reflects shifting demand trends. The stainless steel sector is projected to grow further, supporting baseline nickel consumption. However, demand from the EV battery sector is expected to slow due to rising use of non-nickel chemistries and increased adoption of plug-in hybrid vehicles. Still, new ternary cathode projects globally may support medium-term nickel usage recovery.

The Metalnomist Commentary

The projected nickel market surplus in 2025 signals continued pressure on prices. As Indonesia leads global production, market rebalancing may hinge on battery chemistry shifts and Chinese industrial demand.

Nickel Deficit Forecast Emerges as Indonesia Tightens Ore Supply

Nickel manufacturing

Nickel deficit conditions are expected to return in 2026 as Indonesia tightens ore supply controls and stainless steel demand continues to grow. The International Nickel Study Group forecasts global primary nickel production of 3.715mn t against usage of 3.747mn t, implying a deficit of 32,000t.

The nickel deficit would mark a sharp change after three consecutive years of surplus. The market recorded surpluses of 175,000t in 2023, 116,000t in 2024 and 283,000t in 2025.

The nickel deficit forecast remains modest, but it carries strategic significance because it depends heavily on Indonesian policy. Indonesia has been the main driver of global nickel supply growth, and tighter controls on ore mining could slow the expansion that previously pushed the market into surplus.

The Middle East conflict is adding another layer of uncertainty. Higher energy prices, inflation pressure and disrupted sulphur flows could affect nickel production costs, especially for high-pressure acid leach operations in Indonesia.

Indonesia Ore Controls Reshape Nickel Supply Growth

Indonesia’s approved nickel ore mining quota for 2026 has been set significantly lower than in 2025. The quota can still be revised, but the initial reduction has already changed market expectations.

The country’s revised mineral benchmark pricing mechanism also took effect on 15 April. The new HPM formula raises base prices for all nickel ore grades and includes cobalt, iron and chromium in the valuation for the first time.

This matters because Indonesian nickel supply is no longer expanding under the same low-cost conditions that drove rapid output growth. Ore access, ore pricing, royalties and contained metal values are all becoming more tightly managed.

The policy impact is not evenly distributed. Eramet’s PT Weda Bay Nickel mine is preparing to enter care and maintenance in May after receiving an initial ore quota of just 12mn wet metric tonnes. This is far below last year’s final permit of up to 42mn wmt.

In contrast, Nickel Industries received quota approvals of 14.3mn wmt, up from 10.5mn wmt in 2025. This shows that Indonesia’s controls are not simply cutting all supply. They are also reshaping which operators receive ore access.

The quota system could therefore become a major competitive factor. Producers with larger approved volumes may gain stronger operating flexibility, while others face lower utilisation, higher costs or temporary shutdowns.

HPAL producers are especially exposed. These plants require steady limonite ore supply and large volumes of sulphuric acid or sulphur-linked feedstock. Tighter ore availability and higher reagent costs can quickly pressure margins.

Disrupted sulphur flows from the Middle East conflict have raised concern over HPAL feedstock availability. This is important because Indonesian HPAL projects have become key suppliers of mixed hydroxide precipitate for battery material production.

If sulphur costs remain elevated and ore prices rise under the new HPM formula, HPAL production costs could increase materially. That would weaken the low-cost supply advantage that helped Indonesia dominate battery-linked nickel intermediates.

Stainless Steel Supports Demand as Batteries Disappoint

Stainless steel remains the main support for nickel demand. INSG said the stainless steel sector grew in 2025 and is expected to expand further in 2026.

This is important because stainless steel still consumes far more nickel than the battery sector. Demand from stainless steel, alloys and industrial uses continues to anchor the primary nickel market.

Battery demand has grown more slowly than earlier expectations. Lithium iron phosphate chemistries have gained market share, reducing nickel intensity in parts of the electric vehicle market.

Plug-in hybrid electric vehicle demand has also outpaced fully battery-electric vehicle demand in some markets. This has limited the speed at which nickel-rich battery chemistries absorb new supply.

The result is a market caught between two forces. Supply growth is slowing because of Indonesian ore controls and higher input costs. However, battery demand is not rising fast enough to create a large structural shortage.

This makes the 2026 nickel deficit highly sensitive to policy and disruption. If Indonesia raises quotas, supply could recover. If sulphur, energy or ore costs worsen, the deficit could deepen.

The forecast also changes the market narrative. Nickel has spent recent years under pressure from surplus supply and rising inventories. A move into deficit, even a small one, could stabilise sentiment and support prices.

Still, the deficit is not yet a sign of broad scarcity. It is a warning that Indonesia’s supply discipline, not battery demand alone, is now determining the market balance.

For producers, cost control and ore access will become more important. For buyers, the focus will shift toward supplier reliability, feedstock route and exposure to Indonesian policy.

The Metalnomist Commentary

The nickel market is not tightening because batteries suddenly absorbed the surplus. It is tightening because Indonesia is putting discipline into ore supply while HPAL costs rise. That makes the nickel deficit more policy-driven than demand-driven.

Nickel Prices Expected to Remain Rangebound in 2025 Amid Market Shifts

Nickel

Nickel prices are projected to stabilize within the $15,000-$18,000/tonne range in 2025, driven by firm nickel ore prices but constrained by growing smelting capacity, particularly in Indonesia. While supply chain dynamics and policy changes in Indonesia could cause short-term fluctuations, the overall outlook remains rangebound.

Nickel Ore Prices: A Key Support

Nickel ore prices have remained elevated throughout 2023, with tight supply driving cif prices to $50/wmt or higher. The constrained ore supply, caused by delays in RKAB (Rencana Kerja dan Anggaran Biaya) approvals and limited mining capacity, has kept premiums high. Despite these challenges, Indonesia’s nickel ore output increased by 14% year-on-year in the first nine months of 2023, according to the International Nickel Study Group (INSG).

The Indonesian government is expected to approve additional RKAB quotas to support the growing hydrometallurgy sector, which primarily produces mixed hydroxide precipitate (MHP) for the EV market. However, uncertainty remains regarding the allocation between hydrometallurgy and pyrometallurgy, which produces nickel pig iron (NPI) and matte from higher-grade ores.

NPI Prices Anchor the Market

Indonesia remains the largest NPI producer, with NPI production costs and processing fees setting the lower bounds for Class 1 nickel prices. Rising energy and ore costs have led producers, including Nickel Industries’ Ranger Nickel project, to raise production cost estimates. In Q3 2024, cash costs reached $11,794/t, reflecting a 4.3% increase from the previous quarter.

Global Market Outlook: Balancing Surplus and Demand

The global nickel market is expected to experience a similar surplus to 2023’s 167,000 tonnes. While demand from stainless steel production is anticipated to grow by 3% in 2025, the outlook for the nickel-cobalt-manganese (NCM) battery sector is less optimistic due to the rising popularity of more affordable lithium-iron-phosphate (LFP) batteries.

China’s introduction of 200,000 t/yr of nickel capacity, relying heavily on Indonesian-produced MHP and matte, will likely shape market conditions. Although producers may face slim profit margins, some will maintain production to secure London Metal Exchange (LME) registration, ensuring liquidity and broader sales opportunities.

Indonesia’s Pivotal Role

Indonesia continues to dominate the nickel supply chain, with policies on RKAB quotas, taxes, and environmental standards closely watched by market participants. Any policy shifts could influence global supply and pricing, reinforcing Indonesia's role as a key player in the nickel market.

China and Indonesia Strengthen Ties in Critical Minerals and Renewable Energy

Strengthen Mineral

China and Indonesia are poised to deepen their cooperation in critical mineral extraction and renewable energy, marking a strategic move as global demand for clean energy technologies continues to grow. The announcement came during Indonesian President Prabowo Subianto's inaugural visit to China from November 8–10. The collaboration emphasizes joint initiatives in new energy vehicles, lithium batteries, and photovoltaics, reflecting the two nations' shared commitment to energy transition and economic synergy.

Strategic Agreements and Investments

During President Prabowo's visit, China reaffirmed its support for Indonesia's energy sector transformation, pledging to pursue "high-quality" partnerships in digital economies, clean energy, and infrastructure development. Addressing a business forum on November 10, Prabowo welcomed increased investment from Chinese enterprises across a range of industries.

Significant agreements were sealed during the visit, including a high-pressure acid leaching (HPAL) project in Sulawesi, jointly developed by Green Eco-Manufacture (GEM) and mining giant Vale Indonesia. This project will produce mixed hydroxide precipitate (MHP), a critical precursor in battery cathode production, further strengthening Indonesia’s position in the electric vehicle (EV) battery supply chain.

Indonesia’s Growing Role in Global Nickel and Aluminium Markets

As the world’s largest nickel producer, Indonesia is central to global EV and battery markets. According to the International Nickel Study Group (INSG), the country's share of global nickel output is projected to rise to 60.6% in 2024 and 62.8% in 2025, driven largely by Chinese-backed projects.

Additionally, Chinese firms are investing heavily in Indonesia's aluminium industry. Nanshan Aluminium is expanding its alumina refinery in Bintan and constructing a 250,000 t/yr refined aluminium plant. Chalco and Tianshan Aluminium are each building 1mn t/yr alumina plants in Indonesia, signaling a robust growth trajectory for bilateral collaboration in critical mineral production.

Key Projects in Renewable Energy

Chinese battery materials company Changzhou Liyuan, in partnership with the Indonesia Investment Authority (INA), is scaling up its lithium iron phosphate (LFP) plant in Indonesia. By 2025, the facility's production capacity is expected to expand to 120,000 t/yr from its current 30,000 t/yr, making it the largest LFP plant outside China.

These developments underscore the growing interdependence of China and Indonesia in renewable energy and critical minerals, aligning their national priorities with global sustainability goals.