- Indonesian RKAB speculation lifts prices earlier in week
- Hawkish signals from Fed eventually drag prices lower
Nickel prices on the London Metal Exchange (LME) declined in the week ended 6 March. Prices briefly strengthened earlier in the week amid market speculation over tighter RKAB (annual work plan and budget) approvals for Indonesian nickel ore producers but later eased following repeated hawkish comments from US Federal Reserve officials.
The LME three-month nickel contract averaged $17,385/t, down 3% w-o-w from $17,890/t. Meanwhile, LME warehouse inventories remained largely stable at 287,550 t, compared with 287,976 t in the previous week.
Macro scenario
Indonesian nickel processing utilisation seen declining in 2026
Indonesia’s nickel processing capacity utilisation could decline to 70-75% in 2026, down from around 90% last year, due to lower nickel ore production quotas (RKAB), according to the Indonesian Nickel Industry Forum (FINI). The country’s smelting capacity of about 2.7 million tonnes (mnt) for rotary kiln-electric-furnace (RKEF) and high-pressure acid leach (HPAL) plants requires 340-350 million wet metric tonnes (wmt) of ore, while approved quotas are only 260-270 million wmt. As a result, nickel ore imports may surge to 50 million tonnes (mnt) this year, with about 30 mnt expected from the Philippines, tightening raw material availability by Q2CY’26.
Gulf conflict disrupts sulphur supply to Indonesian nickel refiners
Indonesia’s nickel refining sector faced pressure as disruptions in the Gulf region affected sulphur shipments, a key raw material used to produce sulphuric acid for HPAL nickel processing. The country imports around 75% of its sulphur from the Middle East, and shipping disruptions near the Strait of Hormuz have tightened supply flows.
Hawkish signals from Fed weigh on prices
Hawkish comments from the Federal Reserve signalled that interest rates may stay higher for longer. On the macro front, US private payroll data showed resilience, with the ADP National Employment Report recording an increase of 63,000 jobs in February, the strongest rise since November 2025 and above market expectations of 50,000. Additionally, officials from the Federal Reserve signalled a cautious stance on monetary policy. Policymakers indicated that interest rates may need to remain steady until inflation shows clearer progress toward the 2% target, reducing expectations for near-term rate cuts. This strengthened the US dollar, making commodities such as nickel more expensive for global buyers and putting downward pressure on prices on LME prices.
Outlook
Nickel prices may remain supported by tightening ore availability in Indonesia and rising input costs across the refining chain, though gains could be limited by soft stainless steel demand and macroeconomic pressure from US monetary policy.
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