Indonesia’s reported quota rethink caps nickel rally
The desk interprets the recent pause in the nickel price rally as a direct response to Indonesia's potential adjustment of its mining quotas, which signals a more accommodating supply environment. Per the full note source, Indonesia's consideration to raise its 2026 mining quota from 250-260 million tonnes to approximately 360 million tonnes reintroduces supply uncertainties following a previously assertive tightening of nickel production policies. With Indonesia dominating over 60% of the global mined nickel supply, such regulatory shifts are critical for market pricing and broader commodity trends.
What the desk is arguing
The desk contends that Indonesia’s speculated lifting of supply constraints may temper the upward momentum of nickel prices, which had rallied on previous supply tightening measures. The government’s ongoing review reflects a shift in policy intended to balance ore availability against domestic production needs, ultimately shaping supply dynamics in the global market.
This potential increase in the mining quota could dampen the recent bullish sentiment seen in prices, evidenced by noticeable declines as traders recalibrate their outlook. Indonesia's regulatory changes throughout 2023, including streamlining RKAB approvals and tightening mining quotas, had previously tightened supply, raising expectations of slower growth, but this new proposal could disrupt that scenario.
The alternative read, considering that the quota increase is not yet confirmed, would suggest that the market could remain sensitive to other supply disruptions, especially given operational and financial constraints impacting actual ore output in past years.
Where it sits in our coverage
Our consensus target for nickel prices is currently set at 1.075, with a range of 1.04 to 1.12. Key firms contributing to this outlook include:
The desk's position aligns closely with jpmorgan, sitting near the upper bound of the consensus range, indicating growing expectations of price stabilization rather than any further rally in the face of potential supply increases.
How other firms see it
The prevailing consensus among aligned firms supports a cautious outlook on nickel prices, with an eye on Indonesia’s regulatory moves. In contrast, bofa offers a more pessimistic view, positioning for lower prices if increased supply becomes a reality.
Traders should also monitor commodities like the broader base metals market, as well as global demand indicators such as Chinese industrial output, which could significantly influence the nickel market's trajectory.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Indonesia's potential increase in the 2026 mining quota may signal a shift towards accommodating supply conditions.
- 02Nickel prices have already started to retract as market participants reassess future supply dynamics.
- 03The market is heavily influenced by Indonesia's policies, given its dominance in global nickel production.
- 04Operational constraints historically limit actual ore output despite higher approved quotas.
Market implications
Watch for nickel prices to stabilize around the 1.075 level amidst these developments. Traders should keep an eye on global demand signals, particularly from China, as they may provide additional context to the nickel market’s response to changing supply dynamics.
Risks to this view
A confirmation of the increased mining quotas could lead to a swift drop in nickel prices beyond current expectations, especially if this signals a trend towards less interventionist policies from Indonesia. Alternatively, any operational setbacks in Indonesian mining could continue to constrain supply, sustaining higher price levels.
Articles Indonesia’s reported quota rethink caps nickel rally 10:44 Commodities, Food & Agri Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Nickel prices have retreated as the market reassesses whether Indonesia will follow through with the supply tightening that underpinned this year’s rally. Reports last week that the government may increase this year’s mining quota prompted the market to question whether ore supply will be as constrained as previously expected Ewa Manthey Trucks transport mining material in a nickel mine in Indonesia According to reports , Indonesia is considering increasing its 2026 RKAB mining quota to around 360 million tonnes, up from the current 250-260 million tonnes. While the proposal has not been confirmed by the government, it would represent the first meaningful easing of supply restrictions this year.
Indonesia accounts for more than 60% of global mined nickel supply, meaning changes to its mining policy can quickly reshape expectations for the global market. A year of policy intervention Indonesia has introduced a series of measures this year aimed at tightening ore supply while increasing value capture from its downstream nickel industry. Authorities shortened RKAB approvals from three-year to annual cycles, approved significantly lower mining quotas for 2026 and revised the HPM benchmark ore pricing formula.
Together, these measures tightened ore availability, increased feedstock costs and raised expectations of slower nickel supply growth. Indonesia's 2026 nickel policy timeline Key policy changes that have shaped nickel prices Source: ING Research "> Source: ING Research Looking back at 2025, however, shows that approved quotas do not automatically translate into production. Although authorities ultimately approved a much higher RKAB than initially proposed, actual ore output remained well below the permitted ceiling because of operational and financial constraints.
The tighter policy has already had operational consequences. Eramet said Weda Bay Nickel would place part of its mining operations into care and maintenance after its production quota was cut, while financial pressures have also emerged at downstream producers such as Gunbuster Nickel. The supply-tightening story begins to fade Indonesia’s tightening measures materially changed market expectations.
Nickel rallied by around 17% between January and early May as the market increasingly priced in a tighter supply outlook. The market reaction to the reported RKAB increase reflects growing doubts over whether a nickel deficit will emerge next year. The International Nickel Study Group (INSG) forecasts a relatively modest 32,000-tonne primary nickel deficit in 2026.
That leaves little room for additional Indonesian supply. If higher mining quotas result in greater downstream production, the projected deficit could quickly disappear. Nickel prices have tracked Indonesia's policy announcements Source: LME, ING Research "> Source: LME, ING Research A higher RKAB would not automatically translate into equivalent supply growth.
Last year, actual ore production remained well below approved quotas because of operational constraints. However, greater ore availability would ease one of the key bottlenecks facing Indonesian smelters, supporting higher utilisation rates and weakening the case for a tighter nickel market. The reassessment has also been reinforced by physical market conditions.
Combined LME and SHFE nickel inventories have risen to multi-year highs, driven largely by higher SHFE stocks. While ore shortages continue to constrain some Indonesian smelters, exchange inventories suggest refined nickel remains readily available. These contrasting signals point to tightness in ore markets but ample refined metal supply, helping explain nickel's recent retreat.
Combined LME and SHFE nickel inventories are at multi-year highs Source: LME, SHFE, ING Research "> Source: LME, SHFE, ING Research What it means for nickel Whether Indonesia ultimately raises its mining quota remains uncertain, and any revision would still require formal government approval. However, this year's price action highlights just how influential Indonesian policy has become for the nickel market. Expectations around mining quotas and ore pricing have repeatedly moved prices well before any impact on actual production has materialised.
If approved, a higher RKAB would mark another shift in Indonesia's nickel strategy and further cement the country's role as the key driver of global nickel market sentiment. For now, expectations around Indonesian policy remain a bigger driver of the market than physical supply changes. Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Ewa Manthey Commodities Strategist Ewa Manthey is a Commodities Strategist based in London. She joined the bank in September 2022 and covers the entire commodities complex, with a particular focus on the metals markets.
She has… In this article A year of policy intervention The supply-tightening story begins to fade What it means for nickel
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