Nickel prices declined on Tuesday as the US dollar edged higher against most major currencies, while investment funds continued to bet that the industrial metal may have reached a bottom.
It is difficult to believe that nickel once surged so dramatically it nearly caused a collapse of the London Metal Exchange (LME) just two years ago. Yet for most of this year, the LME market has drifted sluggishly near five-year lows, hovering around $15,000 per metric ton.
Nickel, used in stainless steel production and electric vehicle batteries, is weighed down by a massive supply glut fueled by Indonesia’s output boom. Daily stockpile reports from the LME reinforce this, with registered and unregistered inventories rising steadily to 308,000 tons — the highest since the exchange began publishing off-warrant data in early 2020.
Funds Turn Bullish Despite Weak Market Signals
Funds had been betting against nickel last year, maintaining net short positions until June. While many investors remain bearish, long positions have been building since mid-April. Net long contracts now stand at 45,321 — equal to 272,000 tons — the most bullish stance since March 2022, when nickel prices spiked so violently that LME halted trading.
Still, three-month nickel futures on the LME have been stuck between $14,800 and $16,000 since May, offering little momentum. The bullish case appears to rest on the collective logic that if nickel cannot fall further, it must eventually rebound.
Indonesian Supply Boom Pressures the Market
Indonesia’s production surge has flooded LME warehouses. Chinese-origin nickel within LME inventories has risen from zero in August 2023 to 65% by the end of last month, driven by shipments of Indonesian ore refined into intermediates and sent to China for further processing. Indonesian-branded nickel also began entering the system directly last year, with 8,838 tons recorded in August.
Given the near-daily inventory increases, the resilience of nickel prices is striking, leading some investors to believe the metal may have found a floor near production costs.
Can Indonesia Rein In Output?
Any sustained recovery in prices depends largely on whether Indonesia curbs runaway production. Most other producers have been forced out, with around half a million tons of supply exiting the market in recent years, according to Macquarie analysts. By contrast, Indonesia’s output continues to soar, rising 21% year-on-year to 1.3 million tons in H1 2025, or 69% of global production.
Signs are emerging of tighter regulation, including government task forces seizing mining land lacking forestry permits. The strongest tool remains mine production quotas, with Jakarta planning to reinstate annual caps next year to improve governance and balance supply.
Meanwhile, ore availability has been constrained by delays in permits, poor weather, and declining grades, even prompting Indonesia to import small but steady volumes from the Philippines since early 2024. Whether the government tightens further will decide the outlook — and nickel bulls can only hope it does.
Elsewhere, the US dollar index rose 0.1% to 97.4 by 14:56 GMT, hitting a high of 97.4 and a low of 97.2. Spot nickel prices fell 1.1% to $15,182 per ton by 15:07 GMT.
