Nickel prices could climb further this year as a global supply shortage caused by top producer Indonesia’s decision to limit its production starts to bite, potentially sending the market into a deficit this year, according to Macquarie Group.
In December 2025, the Indonesian government announced significantly tighter and more regulated nickel supply quotas to combat a global supply glut and boost depressed prices this year. Since then, prices of nickel metal as well as nickel pig iron (NPI), nickel sulphate and nickel ore have risen.
As the global market continues to tighten, Macquarie strategists led by Jim Lennon are expecting further upside in nickel prices to reflect the rise in downstream products leading to higher costs. The higher domestic premium in Indonesian nickel ore, as the bank notes, has led to a near $3,000 increase in NPI prices, underpinning the surge in nickel on the London Metal Exchange.
As such, the Macquarie analysts see a floor forming around $17,000–18,000 per tonne for London Metals Exchange-traded nickel, which is currently trading at near the midpoint of this range.
LME prices have decreased around 3% from their level about one month ago.
Production could lag
The Australian bank also highlighted further upside in nickel prices, as production may not rise at all this year due to Indonesia’s restrictions, and this, it said, could lead to a global market deficit versus a previous forecast of a 90,000-tonne surplus. Japan’s Sumitomo last year said the nickel surplus could reach 256,000 tonnes in 2026.
Credit: Macquarie
A shortage of limonite ore and the recent tailings dam accident at Morowali are leading to weaker-than-expected production of MHP (mixed hydroxide precipitate), the intermediate product derived from laterite ores.
The war-related disruption to the supply of sulphur from the Middle East, if prolonged, would also have a negative impact on planned production, Macquarie said, while also noting that some planned expansions of
new capacity are also likely to be delayed.
Through the January-February period, it is estimated that NPI production fell 10% year-on-year, in part due to weaker ore grades and also due to furnaces being switched to make nickel matte (which has higher payables than NPI).
