Indonesia’s nickel market shifts in 2026 as intermediates gain ground: SMM

By Dominikus

Indonesia enters 2026 with a materially different nickel market structure compared with 2025, as Shanghai Metals Market (SMM) projects a clear year-on-year expansion in intermediates that is reshaping global supply balances, while refined nickel remains under sustained surplus pressure.

The outlook was presented by Shanghai Metals Market Commercial Director Jean Tang during an SMM webinar on Tuesday (20 January), with all figures referenced below taken directly from her presentation.

SMM’s analysis shows that the transition from 2025 to 2026 marks a critical inflection point. While 2025 reflected the peak phase of rapid capacity build-out, 2026 is the year when output growth, product substitution, and cost-based competition become clearly visible across nickel pig iron, refined nickel, and battery related intermediates.

Global primary nickel balance: surplus deepens from 2025 to 2026

According to SMM’s global primary nickel supply demand balance, total global supply reached 3.689 million tonnes of nickel content in 2025, rising further to 3.889 million tonnes in 2026. Over the same period, global demand increased from 3.578 million tonnes in 2025 to 3.761 million tonnes in 2026.

This left the market with a surplus of 110.9 thousand tonnes in 2025, widening to 128.1 thousand tonnes in 2026. SMM projects the surplus to continue expanding beyond 2026, peaking above 190 thousand tonnes later in the decade before moderating toward 2030.

Jean Tang said inventories are the key transmission channel from surplus to prices, noting that refined nickel deliveries to exchange warehouses continued in 2025 and are expected to persist in 2026 regardless of downstream demand conditions.

Nickel pig iron: Indonesia expands further in 2026

Nickel pig iron remains the single most important feedstock for stainless steel and the primary driver of Indonesia’s growing influence in the nickel market.

SMM’s global NPI production forecast shows total NPI output rising year on year from 2025E to 2026E, with Indonesia accounting for the vast majority of incremental growth. Indonesian NPI production continues to expand steadily in 2026, while China’s domestic NPI output contracts further.

SMM estimates Indonesian NPI production growth at an average annual rate of 10.23%, driven by abundant saprolite resources, ongoing release of new capacity, and strong demand from stainless steel producers relocating to Southeast Asia. In contrast, China’s high grade NPI production is projected to decline at an average annual rate of 7.15%, reflecting ore dependence and tightening environmental constraints.

This widening divergence between 2025 and 2026 reinforces NPI’s role as the global cost anchor. SMM places NPI cost support at roughly $11,000 to $12,000 per tonne of nickel, a level that increasingly constrains refined nickel price movements.

Ferronickel: continued year-on-year contraction

Ferronickel production continues its structural decline in 2026. SMM’s FeNi forecast shows global production falling further from 2025 levels, with declines visible across Asia, Oceania, Latin America, and Europe.

SMM attributes this year-on-year contraction to substitution rather than demand weakness. As NPI continues to dominate stainless steel feedstock selection on cost grounds, ferronickel is steadily squeezed out of the market, a trend expected to persist through 2030.

Refined nickel: output rises but inventories dominate

Global refined nickel production reached 1.050 million tonnes in 2025, rising to 1.104 million tonnes in 2026, according to SMM’s production forecast. While this represents continued growth, the year-on-year increase from 2025 to 2026 is notably smaller than in earlier years.

SMM highlights that refined nickel remains under pressure not because of insufficient demand, but because of inventory accumulation. In 2026, producers continue to deliver refined nickel into exchange warehouses as margins in nickel sulphate weaken, reinforcing inventory build-up.

Indonesia’s refined nickel share continues to rise from a low base in 2026, on track to reach around 13% by 2030, but this expansion does not translate into pricing power under surplus conditions.

High-grade nickel matte: capacity up, output growth slows

High grade nickel matte shows one of the clearest year-on-year contrasts between 2025 and 2026.

By 2025, Indonesian high-grade matte output reached around 280 thousand tonnes of nickel content. In 2026, output is projected to rise to approximately 295 thousand tonnes, reflecting continued ramp up at existing facilities.

However, SMM emphasizes that capacity growth outpaces output growth. Matte capacity continues to expand through 2026, but actual production rises more slowly due to the fast depletion of sulphide resources and rising input costs. Producers capable of switching between matte and nickel intermediates increasingly evaluate profitability in 2026, particularly given the stable demand profile of stainless steel.

As a result, SMM forecasts Indonesian high-grade matte output growth to remain positive but flatter beyond 2026, with Indonesia maintaining about 84% of global market share by 2030.

Mixed hydroxide precipitate: the sharpest 2025 to 2026 increase

Mixed hydroxide precipitate shows the most aggressive year on year growth from 2025 to 2026.

SMM projects global nickel intermediate supply to rise from 1.264 million tonnes in 2025 to a higher level in 2026, with MHP accounting for the majority of incremental growth. Indonesia’s share of global intermediate production reached around 73% in 2025 and continues rising in 2026 toward 81% by 2030.

Jean Tang attributed this expansion to Indonesia’s resource advantage, technology upgrades, and longer limonite mining lifetimes of 20 to 30 years, compared with 8 to 10 years for saprolite in other regions.

She also flagged a growing cost risk. Sulphur prices exceeded $500 per tonne in 2025, compared with an average of $130 per tonne in 2024, pushing sulphur to account for more than 20% of total MHP production costs in 2026.

Nickel sulphate: divergence between China and overseas markets

Nickel sulphate production shows a clear divergence from 2025 into 2026.

In China, SMM estimates nickel sulphate supply declined by 5.1% year-on-year in 2025, as raw materials flowed toward higher margin downstream products. Demand grew by 6.2%, driven by strong PCAM demand.

From 2025 to 2030, global nickel sulphate supply is forecast to grow at a 7.8% CAGR, with overseas production expanding faster than China’s. In 2026, overseas nickel sulphate output continues to rise, supported by new projects and industrial localization, including in Indonesia.

Stainless steel: Indonesia gains share in 2026

Global stainless steel production continues to expand moderately in 2026. SMM projects global output to grow at an average annual rate of 2.5% through 2030, with China, Indonesia, and India dominating incremental supply.

Between 2025 and 2030, Indonesia is expected to add around 200 thousand tonnes of stainless steel output. The year-on-year increase from 2025 to 2026 reflects multiple projects moving into commissioning and ramp up stages, reinforcing Indonesia’s growing share of global production.

The 300 series remains the dominant stainless steel category due to its nickel content and application performance, supporting sustained demand for Indonesian NPI.

Battery materials: nickel intensity rises in 2026

SMM’s battery demand charts show global lithium battery demand rising from 1,435 GWh in 2025 to 1,806 GWh in 2026. While lithium iron phosphate batteries continue to gain share, medium and high nickel chemistries remain dominant in applications requiring higher energy density.

By 2026, sixth series cathodes account for around 20 to 30% of the mix, while 811 chemistry represents about 58% of overseas ternary cathode precursor production. This drives a continued increase in nickel unit consumption from 2025 into 2026 and beyond.

Alloy and electroplating: steady but slowing growth

Alloy and special steel consumption reached 631 thousand tonnes of nickel in 2025, rising to 651 thousand tonnes in 2026, according to SMM. Growth slows after 2026 as mills increasingly switch from refined nickel to NPI.

Electroplating demand remains a smaller component, broadly flat near 104 thousand tonnes, with SMM projecting a gradual rise toward 112 thousand tonnes by 2030, driven by electric vehicles and precision electronics.

Price logic: 2026 confirms cost driven competition

SMM’s price framework shows refined nickel and NPI becoming increasingly competitive feedstocks in stainless steel production.

Refined nickel’s share of China’s 300 series feedstock fell from around 25% five years ago to 2 to 3% by 2025. In 2026, this share stabilizes at low levels, before SMM projects a gradual recovery to 8 to 10% by 2030 as refined prices decline and NPI costs rise.

Overall, SMM concludes that the shift from 2025 to 2026 confirms a new structural phase in the nickel market. Indonesia’s dominance in intermediates is now a present reality rather than a future projection, while refined nickel remains constrained by inventory accumulation and cost-based competition through 2030.

Editing by Reiner Simanjuntak