Geopolitical tensions and supply controls are expected to lend support to nickel prices in 2026, although a persistent global surplus will continue to cap significant gains, according to a new report by BMI.
The research firm has raised its 2026 nickel price forecast to $16,600 per tonne, up from its previous estimate of $15,800, citing what it describes as a “structurally firmer price environment.” While geopolitical developments—particularly the Iran conflict—are influencing sentiment, BMI expects market dynamics to remain largely driven by supply trends in Indonesia.
Nickel futures on the London Metal Exchange edged up 0.2% to $18,250 per tonne in midweek trading, following a stronger 2.9% gain the previous day.
Indonesia’s Dominance in Supply
Indonesia continues to play a decisive role in the global nickel market. The country is expanding production capacity, with refined output projected to grow by 9.8% in 2026 after a 9% increase in 2025. This growth is expected to widen the global surplus to around 324,000 tonnes, limiting sustained price rallies.
However, recent policy measures are providing some support. Indonesia has reduced its nickel ore mining quota for 2026 to between 260 million and 270 million wet metric tonnes—down significantly from 379 million tonnes the previous year—helping to improve market sentiment.
Geopolitical Pressures and Supply Disruptions
The ongoing tensions involving Iran are adding a new layer of complexity. Indonesia relies heavily on Middle Eastern sulphur imports, and disruptions linked to the conflict have already begun to impact supply chains.
According to reports, a sulphur shortage has forced several Indonesian nickel processors to cut output by at least 10% in recent weeks. This is particularly significant for high-pressure acid leach (HPAL) operations, which depend on consistent sulphur supply.
Rising Costs and Slowing Demand
Higher energy costs tied to geopolitical instability are also weighing on producers, especially higher-cost operations outside Indonesia. These pressures are contributing to a firmer price outlook.
On the demand side, growth is expected to moderate. BMI forecasts global nickel demand to rise by about 3% in 2026, down from 5.8% in 2025. While stainless steel production and the clean energy transition—particularly electric vehicles and renewables—remain key demand drivers, growth is slowing, especially in China.
Battery Technology Shift
Another structural challenge comes from evolving battery technologies. The growing adoption of lithium iron phosphate (LFP) batteries—favoured for their lower cost and improved safety—is reducing demand for nickel-intensive chemistries.
BMI notes that this shift is likely to weigh on market sentiment and limit demand growth despite broader macroeconomic support.
Long-Term Outlook
Looking further ahead, the outlook becomes more supportive. BMI expects the global nickel surplus to gradually narrow as demand strengthens, driven by stainless steel production and the accelerating energy transition.
Prices are forecast to average $16,700 in 2027, rising to $19,000 by 2030. By 2032, as the market potentially shifts into deficit, nickel prices could reach $22,000 per tonne.
Despite this optimism, Indonesia remains the key variable. The pace at which the country scales up refined nickel capacity will ultimately determine the balance of the global market in the years ahead.