Nickel producers are bracing for a tough year in 2025, with the global nickel market expected to remain oversupplied, putting downward pressure on prices. Analysts attribute this oversupply to Indonesia’s rapidly expanding nickel industry, disrupting global markets and driving nickel prices down from previous highs. However, the largest nickel producer revealed plans to cut production by almost 40%, greatly impacting global supply.
Nickel Price Dynamics and Producer Responses
The London Metal Exchange (LME) reported the three-month nickel price at $15,415 per metric ton on December 30. This marks a 7.2% year-over-year drop and a 28.7% decline from its peak of $21,615 in May.
Despite rising global demand, production surges from top producers. Indonesia and China will maintain an oversupply, with further price reductions anticipated.
The global surplus is forecast to shrink slightly, from 103,000 metric tons in 2024 to 87,000 metric tons in 2025, according to Jason Sappor, a senior analyst at S&P Global Commodity Insights. However, this surplus is still substantial enough to keep prices down, increasing the risk of more mine closures.
Producers are already adjusting. The Indonesian government announced plans to manage supply and support prices, while companies have begun suspending operations.
For example, BHP Group paused its Nickel West operations in Australia. Meanwhile, Anglo American announced the sale of two Brazilian nickel mines as part of a restructuring effort.
Adrian Gardner, principal analyst for nickel markets at Wood Mackenzie, warned that further temporary mine closures could occur if prices fall below production costs.
Indonesia’s Nickel Plan Cutting 35% of Global Supply
Indonesia has solidified its position as the world’s top nickel producer. The Southeast Asian country supplied over 56% of global mined nickel in 2024. This dominance could grow further, with the country’s output projected to increase by 7.7% in 2025 to 2.4 million metric tons.
The Indonesian nickel boom comes from a 2020 ban on raw ore exports, encouraging Chinese companies to invest in local processing facilities. These plants convert nickel laterite ore into ferronickel, a key material for stainless steel production.
While Indonesia’s growth boosts its economy, it also increases the global nickel surplus, putting further pressure on prices.
Recently, the world’s top nickel producer is considering cutting its nickel mine quotas by nearly 40% in 2025. This move could reduce global supply by over a third, potentially driving up nickel prices, according to Macquarie Group Ltd. as reported by Bloomberg.
- The proposed cuts would lower output from 272 million tons in 2024 to just 150 million tons this year.
The Indonesian government’s restrictions on nickel mining have already caused supply strains. In 2024, these limitations led to record nickel ore imports from the Philippines, the second-largest producer.
However, the market still experienced oversupply, with weakening demand from the stainless steel and battery sectors contributing to nickel’s second consecutive annual price drop.
Demand Concerns: EV Market Slowdown
Nickel demand, particularly from the battery sector, is under strain and the metal’s role in the electric vehicle (EV) market adds more complexity.
The growing adoption of lithium-iron-phosphate (LFP) batteries and increased demand for plug-in hybrid EVs reduce the need for nickel-rich battery chemistries. These batteries are primarily produced by Chinese companies.
LFP batteries, which are nickel-free, offer lower costs and reduced environmental impact. Their growing adoption, even in Indonesia, is challenging nickel’s dominance in the EV supply chain.
Analysts at ING highlighted sluggish EV sales and a potential rollback of the $7,500 federal tax credit for EV purchases under the Inflation Reduction Act (IRA) as additional challenges. If President-elect Donald Trump follows through on this plan, it could slow the U.S. energy transition and reduce nickel demand from American trading partners.
Amid these shifts, Indonesia’s partnerships with China remain pivotal. Recent agreements between the two nations emphasized collaboration in EVs, lithium batteries, and critical minerals like nickel. These efforts aim to stabilize supply chains and advance the energy transition.
If Indonesia proceeds with significant supply cuts, the nickel market could experience tighter conditions, boosting prices. However, the rise of alternative battery technologies highlights the evolving dynamics in the global nickel and EV industries.
Optimistic Outlook Amid Challenges
Despite the oversupply and price pressures, some analysts remain optimistic about nickel’s prospects. Adrian Gardner from Wood Mackenzie, for instance, remarked:
“We are expecting [a] 10%-12% increase in demand for primary nickel in 2025, almost double the rate of production growth…We are expecting a small average price rise for 2025 on an annual average basis.”
S&P Global Commodity Insights predicts that nickel prices will remain low in the coming years. The analysts project that the global surplus will be at 39,000 metric tons by 2028. This is partly due to the declining demand for primary nickel in the European Union’s EV battery sector over 2024–2028.
Amid this dynamic shift in the nickel market, one company is making huge efforts to advance U.S. nickel independence – Alaska Energy Metals Corporation (AEMC). Its flagship Nikolai project in Alaska holds significant resources of nickel, copper, cobalt, and platinum group metals, essential for renewable energy and electric vehicles.
While nickel producers face immediate challenges, the metal’s long-term outlook depends on balancing supply and demand, technological shifts in the battery sector, and policy decisions in major producing nations like Indonesia.
Overall, 2025 will likely be a pivotal year for the nickel market, testing the resilience of producers and the effectiveness of regulatory interventions.
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