Iran War, Indonesia Curbs to Support Nickel Price: Report

Why It Matters

The combined effect of tighter Indonesian supply controls and Middle‑East geopolitical tensions could stabilize nickel prices, a critical input for stainless‑steel and electric‑vehicle batteries, influencing global commodity markets and clean‑energy investments.

Key Takeaways

• BMI lifts 2026 nickel price forecast to $16,600/tonne.
• Indonesia caps ore quotas at 260‑270 Mt, down from 379 Mt.
• Sulphur shortage cuts Indonesian processor output by at least 10 %.
• Global surplus expected at 324,000 t, limiting price rallies.
• Lithium‑iron‑phosphate battery rise dampens nickel demand growth.

Pulse Analysis

The nickel market is at a crossroads as BMI’s latest forecast nudges the 2026 price to $16,600 per tonne, reflecting tighter sentiment despite a still‑large surplus. Geopolitical turbulence in the Middle East, especially the Iran conflict, has heightened risk premiums and pushed energy and input costs higher for producers worldwide. This backdrop is reshaping trader expectations, with the London Metal Exchange futures already testing $18,250 per tonne after modest gains, signaling that price support may be more fragile than earlier projections suggested.

Indonesia, the world’s largest refined nickel supplier, is playing a decisive role by slashing its ore mining quotas to 260‑270 million wet metric tonnes for 2026, a sharp reduction from last year’s 379 million. The policy aims to curb over‑production and bolster prices, yet the country’s reliance on sulphur imports from the Middle East introduces a new vulnerability. A sulphur shortage triggered by the Iran war has forced several Indonesian smelters to trim output by at least 10 %, tightening supply and adding a layer of price volatility that could benefit higher‑cost producers outside the archipelago.

On the demand side, growth is expected to decelerate to 3 % in 2026, driven by a structural shift toward lithium‑iron‑phosphate (LFP) batteries, which require little or no nickel. While stainless‑steel consumption and the broader clean‑energy transition continue to underpin baseline demand, the rise of LFP chemistry—favored for safety and cost—poses a headwind for nickel‑intensive cathodes. Consequently, analysts foresee a modest surplus of roughly 324,000 tonnes in 2026, limiting sustained price rallies, though long‑term outlook remains positive as capacity expansions and a potential market deficit by the early 2030s could lift prices toward $22,000 per tonne.