On the night of January 6, SHFE nickel prices surged strongly by 8% and closed at Yuan 147,720/tonne. LME 3M nickel contract extended its gains to 10%, reaching a high of US $18,735/tonne, the highest since June 2024.
The market has been influenced by news of tighter RKAB approvals in Indonesia. The Indonesian Nickel Miners Association (APNI) recently indicated that according to the annual Work Plan and budget (RKAB), the target nickel ore mining quota for 2026 is approximately 250 million tonnes, a reduction of about one-third from the 379 million tonnes in 2025. This news sparked concerns over future supply shortages, driving nickel prices up rapidly.
From a supply-demand balance perspective, the global nickel market was already in a surplus in 2025. If Indonesia does not impose control over nickel mines, it is estimated that the global surplus of primary nickel will be around 430,000 tonnes in Ni. content in 2026. However, the balance sheet would change significantly if Indonesia strictly enforced quota controls. According to Mysteel, if Indonesia's actual nickel ore supply is 250 million tonnes and shipments from the Philippines increase correspondingly, the global nickel market could shift into a deficit of approximately 60,000 tonnes in Ni. content.
On the macro front, recent expectations for cash injection by the People's Bank of China also stimulated the motivation of funds to go long on nickel prices, which also led to a strong surge in SHFE nickel prices to the daily limit. Additionally, the short-term uncertainty remain high on the ore supply side, as there is no official confirmation yet on whether Indonesia will implement the 250-million-tonne quota. Based on estimates, Indonesia's domestic nickel ore demand in 2026 is projected at about 320 million wet tonnes. Even considering potential imports of 25 million wet tonnes from the Philippines, a supply gap of roughly 50 million wet tonnes is still expected.
Source: Mysteel
In recent years, Indonesia's policies towards the nickel industry have continued to show a tightening trend. In 2021, Indonesian officials indicated the possibility of imposing export taxes on nickel products with a nickel content below 70% to encourage the expansion of domestic processing. This stance was reiterated in 2022 regarding potential taxes on the exports of nickel pig iron and FeNi. In 2023, Indonesia suspended approvals for new pyrometallurgical projects, aiming to develop new energy industry chains and facilitate industrial transformation. Furthermore, in 2025, Indonesia also signaled its intention to control nickel ore quotas. Although this was not ultimately implemented, the nickel ore market experienced supply tightness for much of the year. Coupled with rising prices of auxiliary materials, this provided solid support at the margin for nickel.
Now, it remains unclear whether the 2026 nickel ore RKAB quota will be finalized at 250 million tonnes. During the period when the RKAB quota was still unclear in for January, market concerns over future supply had already driven a significant increase in nickel price volatility. Additionally, while Indonesia has not strictly limited total volumes in recent years, it has tightened the approval pace for RKAB. This has often resulted in periodic supply tightness for nickel ore at the beginning of each year, further amplifying market anxieties about the future. This may thus drive the nickel price to continue its relatively strong upward trend.
In the near term, although nickel prices were already at elevated levels, they were unlikely to return quickly to fundamental benchmarks due to expectations of further tightening in nickel ore supply. Chinese refined nickel producers slightly increased their production schedules in January due to improved profitability, but the rise was limited. Supported by a marginal narrowing of the fundamental surplus, the average nickel price was still expected to edge higher. However, with the gradual release of nickel matte (MHP) capacity in Indonesia, prices faced potential downward pressure later. Overall, nickel prices were projected to maintain a pattern of wide fluctuations in January and February. Market participants were advised to monitor the actual implementation of Indonesia's nickel ore quotas. Should the final RKAB quotas prove less restrictive than anticipated, nickel prices would face renewed downward pressure.
Written by Cora Ji, jiruyan@mysteel.com
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