Recently, nickel prices have fluctuated, mainly influenced by the unstable situation in the Middle East, the tightening of Indonesia's RKAB quotas, and the implementation of export tariffs for exports in Indonesia.
Source: Mysteel
I. Geopolitical Risk: Strait of Hormuz Blockade
The primary source of uncertainty for nickel prices stems from instability in the Middle East. Shipping disruptions in the Strait of Hormuz, which began in late February 2026, have directly impacted the supply of sulfur--a key auxiliary material for Indonesia's HPAL projects. Indonesia relies on the Middle East for 76.2% of its sulfur imports, with industrial parks such as Morowali (IMIP) and Obi Island exhibiting dependence levels of around 90% on Middle Eastern sulfur. Producing one metric tonne of nickel in MHP consumes 9-10 metric tonnes of sulfur. Currently, sulfur accounts for 35% of the total cost of MHP, surpassing the 31% attributable to nickel ore, the primary raw material. Sulfur inventories at Indonesian smelters generally cover only one to two months of production. Should the Strait of Hormuz remain blocked over an extended period, some projects could face raw material supply shortages starting in late April. Local Indonesian companies have already begun planning to reduce operating rates in advance to manage consumption and sustain production lines.
Additionally, the Trump administration has set April 6 as a deadline for reaching an agreement with Iran, with the U.S. reportedly planning to increase the number of oil tankers transiting the Strait of Hormuz by 20. This signals a potential easing of tensions, and market expectations suggest that if the two sides reach a settlement, the geopolitical premium will gradually fade. However, based on statements and actions from both Iran and the U.S., a resolution to the geopolitical impasse is likely to emerge only in phases, with the earliest possible progress expected toward the end of April.
II. Tightening of Indonesia's RKAB Quotas Combined with Production Suspension Impacts
Indonesia's nickel supply is currently facing multiple pressures. First is the tightening of nickel ore quotas; the RKAB nickel ore quota target for 2026 has been set at 260-270 million tonnes, representing a reduction of over 30% from the 379 million tonnes actually realized in 2025. As of mid-March, only around 50 mining companies had been approved for a total of approximately 100 million tonnes in quotas, with more than 200 mining companies still awaiting approval.
Second is the production suspension and maintenance of four HPAL projects, including the QMB facility, following a tailings incident in February. These four projects have a combined annual capacity of 150,000 tonnes in Ni. content, with the suspension expected to impact production by an estimated 12,000-20,000 tonnes in Ni. content. Based on a comprehensive assessment, Indonesia's MHP production forecast for 2026 has been revised downward to a range of 480,000-520,000 tonnes in Ni. content, a reduction of 30,000-70,000 tonnes from earlier projections.
III. Indonesia's Export Tariff Policy
On March 25, 2026, Indonesia's Minister of Finance stated that the President had approved the imposition of export tariffs on coal and nickel. However, according to the latest information, the export tariff plan, originally scheduled to take effect on April 1, had been postponed, as the policy remained pending the results of a joint study by the Ministry of Energy and Mineral Resources and the Ministry of Finance. If the tariff were implemented, it would directly raise the export costs of Indonesian nickel products, providing floor support for nickel prices.
Looking ahead, if tensions in the Middle East eased, market attention would return to nickel's fundamentals. Should RKAB approvals in Indonesia accelerate after Ramadan, coupled with a recovery in the sulfur supply chain, the market believed nickel prices would likely trade in a strong range around Yuan 140,000/tonne. Any further upside would depend on tangible improvements in downstream demand and a boost from the tariff policy. In the opposite scenario, the market saw the possibility of nickel prices surging to the Yuan 150,000-160,000/tonne range.
Written by Cora Ji, jiruyan@mysteel.com
