War in Iran and output caps in Indonesia are expected to support nickel prices in 2026, though a persistent global oversupply will continue to limit gains, according to a new report by industry research firm BMI.
Citing “a structurally firmer price environment,” BMI on Tuesday raised its 2026 nickel price forecast to $16,600 (C$22,742) per tonne. It had previously been forecasting an average price of $15,800 for the year.
“For the remainder of 2026, while geopolitical developments in the Middle East are expected to continue influencing market sentiment, the nickel price outlook is likely to remain dominated by supply‑side dynamics in Indonesia,” BMI wrote in its report.
Three-month nickel futures on the London Metal Exchange rose 0.2% to $18,250 per ton in Wednesday afternoon trading, LME data show. That’s after a 2.9% jump Tuesday.
Indonesia supply
Indonesia plays a central role in shaping nickel prices. The country is continuing to expand production capacity, with refined nickel output forecast to grow 9.8% in 2026 following 9% growth in 2025, widening the global surplus. BMI expects the market surplus will widen “modestly” to about 324,000 tonnes in 2026, limiting the scope for sustained price rallies.
Still, policy adjustments in Indonesia offer some support. The government’s decision to cap nickel ore mining quotas for 2026 at 260 million to 270 million wet metric tonnes has improved sentiment, BMI says. That’s down from a quota of 379 million tonnes a year ago.
Geopolitical risks are also playing a growing role. With more than two-thirds of Indonesia’s sulphur imports originating from the Middle East, supply disruptions could tighten sulphur availability, raising input costs for high-pressure acid leach operations and constraining nickel supply growth.
A sulphur shortage — caused by a disruption in supply triggered by the Iran war — has forced several Indonesian nickel processors to curb output by at least 10% since last month, Reuters reported this week, citing three sources familiar with the matter.
Energy costs
Nickel producers must also content with higher energy costs linked to the conflict, BMI says. This is especially problematic for higher-cost operations outside Indonesia, adding further upward pressure on prices.
At the same time, demand growth is expected to slow, according to BMI. Global nickel demand should climb about 3% in 2026, down from 5.8% in 2025, reflecting softer expansion across key sectors, the firm says.
Demand fundamentals remain anchored by stainless steel production and the clean energy transition, particularly electric vehicles and renewable energy systems. Mainland China is expected to remain the largest source of demand growth, though at a slower pace than in recent years.
Battery technology
Structural shifts in battery technology are also emerging as a key headwind. The increasing adoption of lithium iron phosphate batteries — favoured for their lower cost and safety — is eroding demand for nickel-intensive chemistries, BMI says.
“This mix shift is likely to keep sentiment subdued and temper nickel demand growth despite broader macro tailwinds,” BMI said.
The longer-term outlook for producers is more encouraging, with BMI forecasting a gradual narrowing of the surplus as demand climbs due to growth in the stainless-steel sector and an acceleration of the clean energy transition.
Nickel prices could average $16,700 next year, rising to $19,000 by 2030, according to BMI. By 2032, as the market tips into a deficit, prices could hit $22,000, BMI adds.
“Over the medium to long term, Indonesia remains the largest source of uncertainty for the refined nickel market,” BMI said in its report. “Ultimately, the speed at which refined nickel capacity is scaled up will determine how well supplied the global market will be over the coming decade.”