Key Takeaways:
- Indonesia nickel production cut announced for 2026 lifts LME prices to $16,560 per tonne, a nine-month high.
- Indonesia, which supplies about 70% of global nickel, plans reduced output to better align supply with demand.
- Despite recent gains, nickel still ended the year among the weakest performers on the LME due to elevated stocks and heavy deliveries.
- Silver has shown extreme volatility this week, plunging over 10% one day then rebounding to $74 per troy ounce.
Nickel prices climbed to their highest level since March after Indonesia signalled plans to curb production, a move that sent metal traders re-pricing supply expectations for 2026 and beyond. Contracts on the London Metal Exchange rose 4.7% on Tuesday to $16,560 per tonne, marking the most significant advance in months.
Indonesia nickel production cut to reshape market
The Indonesian government has told markets it will cut nickel output next year to better match demand and supply, according to remarks attributed to the country’s minister of energy and mineral resources. The announcement carries weight: Indonesia accounts for roughly 70% of the world’s nickel production, giving its policies outsized influence on global pricing and industrial planning.
Traders said the statement helped narrow the premium on spot metal and supported speculative buying on the LME, where nickel has struggled for much of the year. Despite Tuesday’s gains, the metal remains among the worst performers on the exchange for the calendar year, a result largely blamed on a surge in shipments and the rapid build-up of inventories in warehouses.
Nickel is a widely used industrial metal, central to stainless steel production and an essential input for many battery chemistries powering electric vehicles. Any sustained shift in supply from a dominant producer can ripple through manufacturing chains, potentially affecting costs for stainless-steel makers and battery manufacturers worldwide.
Market participants welcomed the signal from Jakarta as a pragmatic step to rebalance a market that has been buffeted by oversupply. Analysts note, however, that the impact on end users will depend on the scale and timing of the cuts and whether other producing countries adjust their output in response.
“A production adjustment in Indonesia is material for global balances,” said a metals strategist at a European brokerage. “Even a modest curtailment will tighten the market and could support a recovery in prices, but the timing and enforcement matter.”
For 2025 and beyond, attention will focus on how Indonesia implements the change, whether mid-tier producers follow suit and how inventories held in exchange warehouses evolve. The LME’s inventory metrics have been a key driver of sentiment this year, with higher stocks exerting downward pressure on prices despite intermittent demand improvement.
Elsewhere in the precious metals market, silver displayed dramatic volatility. The metal plunged by more than 10% in a single session—the fastest fall since 2020—before rallying 5.2% on Tuesday to about $74 per troy ounce. Silver briefly traded above $80 per ounce earlier this week for the first time on record, having risen from roughly $50 in November; year-to-date the metal has more than doubled in price.
Looking ahead, the nickel market will be monitored closely for concrete implementation details from Jakarta and for signs that producers and consumers adjust inventories or contracts. A coordinated pullback in output could lift already volatile prices, while continued deliveries and heavy stock builds would likely cap gains.
Investors and industrial buyers will be weighing the implications for downstream costs, particularly in the EV battery chain where nickel content influences both performance and price. For now, the market is left to interpret policy signalling out of Indonesia and to adjust positions accordingly.
