Japan's Sumitomo Metal Mining expects the global nickel market to stay in surplus next year, at 34,000 tonnes, down from 38,000 tonnes this year. It sees Indonesian output recovering as mining quotas may rise and key input costs fall.
At a glance
- Indonesian nickel pig iron output is forecast to rebound 11.9% to 1.88 million tonnes in 2027.
- Global nickel demand is seen rising 6% to 3.92 million tonnes, while supply rises 5.8% to 3.96 million tonnes.
- Nickel demand from batteries is expected to rise to 620,000 tonnes in 2027 from 560,000 tonnes this year.
Background
Nickel comes in two broad grades. Class 1 is high-purity refined metal used in batteries and other applications. Class 2 mainly covers nickel pig iron (NPI) and ferronickel, which go into stainless steel. Indonesia produces more than 60% of the world's nickel, so its output largely sets whether the market is in surplus or deficit.
What happened
Sumitomo Metal Mining, Japan's top nickel smelter, forecasts a global nickel surplus of 34,000 tonnes in 2027, narrowing from 38,000 tonnes this year. The figures come from its half-year market outlook, released on Tuesday.
The company expects demand to rise 6% to 3.92 million tonnes next year, supported by steady stainless steel use and growing demand for specialty steel in AI data centres. Supply is seen rising 5.8% to 3.96 million tonnes.
Why supply recovers
Indonesia is the key. Its nickel pig iron output is expected to fall 2.3% this year after government cuts to mining quotas, then rebound 11.9% to 1.88 million tonnes in 2027. It had risen 12.4% in 2025 before the quota cuts. Potentially higher quotas could lift production, and lower sulphur and sulphuric acid prices could boost output of nickel intermediates, general manager Shirou Imai said.
"In 2027, we anticipate that a recovery in NPI production will ease the shortage of Class 2 nickel, while the continued decline in Chinese cathode production will soften the surplus of Class 1 nickel," Imai said.
What it means
A narrower surplus still means more nickel than buyers need, which leaves little room for a sustained price rally. The balance between the two grades is shifting, though, with Class 2 tightness easing and the Class 1 surplus softening.
Battery demand remains a growth area. The company, which supplies cathode materials for Panasonic batteries used in Tesla vehicles, expects nickel demand from batteries to rise to 620,000 tonnes next year from 560,000 tonnes, driven by Chinese electric vehicle sales.
Our read
Outlook: bearish. A continued surplus, even a narrower one, limits upside for nickel prices. Indonesian quota decisions could change the balance quickly.
What to watch
- Indonesia's 2027 nickel mining quotas.
- Sulphur and sulphuric acid prices, which affect nickel intermediate output.
- Chinese electric vehicle sales and battery nickel demand.
For information only, not investment advice.
Nickel price in India
metalscost.com India reference price as of 2026-10-16.
Detailed analysis
Timeline
- 2026-10-06: Sumitomo Metal Mining publishes its half-year nickel market outlook.
Demand Drivers
Nickel demand is seen rising 6% on stainless steel, AI data centres and batteries.
Supply Drivers
Indonesian nickel pig iron output is forecast to rebound 11.9% to 1.88 million tonnes in 2027.
Government Policies
Indonesia's mining quotas are the main swing factor for supply.
What could lift prices
- The surplus is narrowing, from 38,000 tonnes to 34,000 tonnes.
- Battery nickel demand is expected to grow by 60,000 tonnes next year.
What could weigh on prices
- The market stays in surplus for a second year.
- A rebound in Indonesian output could add more supply than expected.
Country impact
| Country | Impact | Reason |
|---|---|---|
| Indonesia | High | It produces more than 60% of global nickel and drives the supply outlook. |
| China | Medium | Chinese EV sales drive battery nickel demand while its cathode output declines. |
Industry impact
| Industry | Effect | Reason |
|---|---|---|
| Stainless Steel | Positive | More nickel pig iron eases the shortage of Class 2 nickel. |
| Electric Vehicle Manufacturing | Positive | A surplus keeps battery nickel supply ample. |
Who gains, who loses
- Stainless steel makers: More Class 2 nickel supply should ease input costs.
- Higher-cost nickel miners: A continued surplus limits price support.
Other ways this could play out
- If Indonesia keeps mining quotas tight, the surplus could shrink faster or turn into a deficit.
- If quotas rise more than expected, the surplus could widen.
Price risks
- Tighter Indonesian quotas would cut supply and support prices.
- Weaker Chinese EV sales would slow battery nickel demand.
Historical comparison
- 2025: Indonesian nickel pig iron output rose 12.4% before quota cuts pushed it lower in 2026.
Technical view
Price is trading below both its 20-period and 50-period moving averages, a bearish alignment.
Computed from metalscost.com's own stored price history.
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