Nickel Rally Pressured by Ongoing Global Oversupply

Key Moments

Nickel’s January Surge Raises Stainless Cost Concerns

Steelmakers and buyers are closely watching nickel prices after a sharp January rally. The move has raised concerns about higher stainless steel prices in early 2026.

LME three-month nickel contracts broke above their 2025 trading range of roughly USD15,000 per tonne in mid-December. Prices hit a low of USD14,263 per tonne on December 16, near the five-year low seen in April 2025. However, values rebounded later in the month and peaked at USD18,756 per tonne on January 23.

Meanwhile, a broader rise in ferrous and non-ferrous metals supported nickel prices in January. Stronger investor participation also played a role. Initially, expectations of tighter Indonesian mining quotas drove much of the rally. Indonesia accounts for about 60% of global nickel output, up from 31.5% in 2020. On December 19, the Energy and Mineral Resources Ministry confirmed plans to cut ore production quotas by around one-third, targeting 250–260 million tonnes, subject to approval in March.

Policy Aims in Indonesia Versus Market Skepticism

This analysis first appeared in the January edition of MEPS International’s Stainless Steel Review, which tracks stainless markets, prices, and outlooks across Europe, Asia, and North America.

According to MEPS respondents, Indonesian policymakers want to keep nickel prices near USD17,000 per tonne. To achieve this, they aim to better align ore supply with domestic smelter demand. The goal is to support profitability across the value chain.

However, market participants remain cautious. Many stainless producers surveyed questioned whether January’s price gains can last. They pointed instead to the broader supply-demand balance.

Global Oversupply and Rising LME Stocks

Global nickel oversupply reached nearly 200,000 tonnes in 2025 and is expected to remain similar this year. At the start of January, LME class one inventories stood just above 255,000 tonnes. Since then, stocks have risen to more than 285,000 tonnes.

As a result, rising inventories may weaken price support. This trend could offset any tightening from Indonesia’s proposed mining quota cuts.

Emissions Rules Reshape Raw Material Choices

European industry sources expect Asian steelmakers to adjust raw material sourcing in 2026. This shift could lift demand for class one nickel traded on the LME. The change follows the launch of the EU’s Carbon Border Adjustment Mechanism (CBAM) on January 1.

As a result, producers supplying Europe may move away from higher-emission nickel pig iron. Instead, they are likely to favor lower-emission class one nickel to meet CBAM requirements.

However, the pace of this shift remains uncertain. It depends on how quickly the European Commission validates actual emissions from foreign mills. If verification is not completed by September 2027, exporters will face default emissions benchmarks. These may not reflect real production emissions and could raise CBAM costs.

Near-Term Stainless Surcharges Versus Longer-Term Nickel Outlook

Despite doubts about the rally’s durability, January’s nickel spike is likely to affect stainless prices in the near term. Mills are expected to pass through higher raw material costs.

In the U.S., this will show up in February alloy surcharges. North American Stainless has announced a USD252 per tonne increase for grade 304 coil and bars. Meanwhile, grade 316 surcharges will rise by USD390 per tonne for coil and USD405 per tonne for bars.

Even so, MEPS forecasts suggest elevated nickel prices will not last. Over the longer term, raw material costs are expected to ease from current levels.