Three months of nickel on the London Metal Exchange (LME) hovering around $17,900 per tonne, recovering from a mid-week slump, but still up about 7 percent on the week and near a 19-month high.
The pause followed a dramatic rise on Wednesday (Jan 7), when prices rose more than 10 percent in their biggest single-day increase in more than three years, driven by heavy Chinese buying and renewed concerns about production cuts in Indonesia, the world’s dominant supplier.
The rally ended a two-year squeeze on nickel, which had been pressured by Indonesia’s rapid expansion of mining and processing.
That flow of material weighed on prices and dented enthusiasm for nickel’s role in electric vehicle batteries, where demand growth has been slower than initially expected.
However, this week’s shift further underlined how sensitive the market remains to policy signals from Jakarta and shifts in speculative positioning.
The Indonesian policy signals shocked the market
At the heart of the latest volatility are expectations that Indonesia could tighten mining quotas under the annual RKAB approval process.
Mining Minister Bahlil Lahadalia said the government would do so reduce production quotas to support commodity prices and increase state revenues. Indonesia produced about 70 percent of the world’s nickel last year, giving policymakers outsized influence over prices.
These concerns were amplified when Vale (NYSE:VALE) launched subsidiary PT Vale Indonesia mining temporarily halted at its Pomalaa and Bahodopi operations after failing to gain approval for its 2026 production plan.
The company said production would be around 30 percent of normal capacity during the outage, although it added that the delay “will not disrupt overall operational sustainability” and that approvals were expected “in the near future.” Operations continue at Vale’s flagship Sorowako mine.
Deputy Mining Minister Yuliot Tanjung confirmed that approvals are “currently being consolidated,” but declined to specify final quota levels.
The uncertainty intensified short-covering in the nickel market, pushing prices towards $18,800 per tonne earlier this week before momentum cooled.
Meanwhile, inventory levels remain a crucial counterbalance. Shares registered with the LME have risen more than 300 percent since the start of 2025 to around 275,600 tonnes, while a further 112,000 tonnes are no longer under warrant and may be available to the market.
That cushion has limited the sustainability of the rallies, even as prices react sharply to overall risk.
Regulatory supervision increases the pressure on supply
The supervision of regulators outside Indonesia also determines the market’s longer-term prospects.
In Europe, the European Commission has a Phase II study in the proposed $500 million sale of Anglo American’s (LSE:AAL,OTC:NGLOY) nickel business to China-backed MMG (OTCPK:MMLTF), citing concerns over security of supply for the bloc’s stainless steel industry.
EU competition chief Teresa Ribera said regulators will investigate whether the transaction “could jeopardize continued and reliable access in Europe” to ferronickel supply.
MMG said it would continue to work with regulators and expressed confidence it could address the commission’s concerns, while Anglo American said it believes European customers would support its continued role as a marketer of ferronickel if the deal goes through.
The Commission has set March 20, 2026 as the deadline for a final decision.
Capital flows are focused on nickel assets
In addition to volatile spot trading, longer-term capital continues to focus on nickel and other critical minerals through specialty investment vehicles.
Appian Capital Advisory and the International Finance Corporation, a member of the World Bank Group, have launched a new one $1 billion partnership focused on developing critical minerals, metals and mining projects in emerging markets.
The partnership’s first investment is in Atlantic Nickel’s nickel-copper-cobalt project in Brazil, which produces Santa Rita. The investment is a co-investment together with Appian to promote the mine’s transition to underground operations.
Santa Rita, located in the state of Bahia, is expected to increase production to approximately 30,000 tonnes of nickel equivalent per year and has an expected mine life of more than 30 years. The asset is owned by Atlantic Nickel, a wholly owned subsidiary of Appian.
For now, nickel’s steadier tone suggests the market is recalibrating after an explosive move. With prices still well above end-2025 levels, inventories rising and policy signals remaining fluid, the next phase of the market is likely to depend on enforcement rather than demand.
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Securities Disclosure: I, Giann Liguid, have no direct investment interest in any company mentioned in this article.
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