The nickel market is in chaos right now because of a perfect storm of oversupply, geopolitical tensions, changing regulations, and uncertainty about future demand. To understand why, let’s break down each major factor and see how they interact to create the current turbulent situation.
## Oversupply from Indonesia
The biggest single reason for the chaos is a massive surge in nickel production from Indonesia. Indonesia’s output has skyrocketed, rising 21% year-on-year to 1.3 million tons in the first half of 2025, which is about 69% of global production[2]. This flood of nickel has filled up warehouses at the London Metal Exchange (LME), with inventories reaching their highest levels since 2020[5]. The market is so oversupplied that prices have dropped to five-year lows, hovering around $15,000 per metric ton[5][7].
Indonesian nickel is cheap to produce, thanks to new technologies and integrated operations that have pushed down costs[3]. Even as prices fall, Indonesian producers can still make money, so they keep pumping out more metal. This has forced many other producers around the world to shut down or cut back, with about half a million tons of supply leaving the market in recent years[2]. But Indonesia shows no signs of slowing down, and until it does, the oversupply problem will likely continue.
## Geopolitical Tensions and Resource Nationalism
Geopolitical issues are adding another layer of chaos. Countries rich in critical minerals, like nickel, are increasingly asserting control over their resources. This is called resource nationalism. Governments want more say over how their minerals are mined, processed, and sold, often to boost their own economies or for national security reasons[1].
For example, Chile (a major lithium producer) and the Democratic Republic of Congo (a key cobalt source) have tightened state ownership rules and raised royalties, disrupting global supply chains for battery metals[1]. While nickel is not directly mentioned here, the trend is clear: governments are becoming more protective, which can lead to sudden changes in rules, export bans, or higher costs for miners. This creates uncertainty for everyone in the nickel market, from miners to manufacturers.
China, a major player in metals and mining, has also introduced new export controls on rare earth production technologies and certain critical elements[1]. While this does not directly target nickel, it shows how geopolitical moves can ripple through the entire critical minerals sector, making investors and companies nervous about future access to key materials.
## Trade Barriers and Sanctions
Trade barriers and sanctions are further complicating the nickel market. The United States has banned imports of Russian nickel, but a loophole allows Russian-mined nickel to still reach the US via Europe[4]. Russian nickel is refined in Finland (which is in the EU), and then shipped to the US as a European product, bypassing the ban[4]. This highlights how complex and leaky global supply chains can be, and how sanctions sometimes fail to achieve their goals.
Meanwhile, speculation about potential US tariffs on other metals, like copper, is causing traders to reroute shipments and distort prices[1]. While this example is about copper, it shows how trade policy uncertainty can spill over into the nickel market, adding to the overall sense of chaos.
## Weak Demand and Changing Technologies
On the demand side, things are not much better. Nickel is mainly used in stainless steel and, increasingly, in electric vehicle (EV) batteries. But demand growth has not kept up with the surge in supply. Economic slowdowns in major economies could hurt stainless steel consumption, especially in construction and manufacturing[3].
EV sales, which were expected to drive nickel demand, are growing more slowly than hoped. Subsidies for EVs are being cut in some key markets, which could slow the adoption of electric cars and, in turn, reduce the need for nickel in batteries[3].
There is also a risk that new battery technologies could use less nickel. Researchers are working on batteries that need little or no nickel, which could further reduce demand if these technologies become mainstream[3]. This adds another layer of uncertainty for anyone betting on a nickel price recovery.
## Market Speculation and Investor Behavior
Despite all these problems, some investment funds are betting that nickel prices have hit rock bottom and will eventually recover[5]. They are building large long positions, hoping that the market will turn around. But with no clear signs of a rebound, this is more of a gamble than a sure thing. The market lacks momentum, and prices have been stuck in a narrow range for months[5].
This kind of speculation can add to market volatility. If prices do start to rise, it could trigger a rush of buying, but if the fundamentals do not improve, the rally could fizzle out just as quickly.
## Regulatory and Environmental Pressures
Governments are also paying more attention to how minerals like nickel are mined and processed. There are growing demands for better environmental practices, human rights protections, and carbon-neutral production[6]. Companies that can meet these standards may have an advantage, especially in markets like North America and Europe where buyers are increasingly concerned about the origins of their materials[6].
However, meeting these standards can be expensive and time-consuming. Projects that aim to produce nickel with a lower carbon footprint, like Canada Nickel’s NetZero Metals initiative, face high costs and execution risks[6]. If nickel prices stay low, it will be hard for these projects to attract the investment they need to get off the ground.
## The Role of China
China plays a huge role in the nickel market, both as a consumer and as a processor. Chinese companies have built up massive capacity to process Indonesian nickel ore into intermediates and refined metal[2]. This has helped absorb some of the oversupply, but it has also kept refined nickel prices low[3].
If Chinese demand weakens, or if the government introduces new policies that affect nickel imports or processing, it could have a big impact on the global market. China’s actions are always a wildcard in commodity markets, and nickel is no exception.
## Looking Ahead
The nickel market is unlikely to find stability anytime soon. Oversupply from Indonesia shows no sign of ending, and until production growth slows or demand picks up significantly, prices will probably remain under pressure. Geopolitical tensions, trade barriers, and regulatory changes add to the uncertainty, making it hard for anyone to predict what will happen next.
Investors, miners, and manufacturers all face tough choices. Some are betting on a price recovery, while others are cutting back or looking for ways to reduce their exposure to nickel. The only certainty is that the chaos is likely to continue until the market finds a new balance between supply and demand.