After soaring copper and aluminum, is it finally nickel's turn? Indonesia plans to cut nickel production and ushered in three consecutive increases

The Zhitong Finance App learned that LME nickel prices, which can be described as being sluggish for a long time since the “LME nickel price epic emptying period” in 2022, have rarely risen for three consecutive days, rising further on the basis of a sharp rebound from an eight-month low. The main reason is that commodity traders generally expect that the scale of nickel supply in Indonesia, the largest producer, may be drastically reduced. After copper and aluminum, both commodities, achieved a sharp rise this year and moved towards a bull market trajectory, the non-ferrous metal nickel, which had been sluggish for a long time, finally ushered in an explosive rise, and this wave of gains may not be a fleeting price counterattack. Under the joint catalysts of the Federal Reserve's interest rate cut cycle and long-term demand for electric vehicles, nickel is expected to continue to rebound from near its lowest point in 3 years.

The non-ferrous metal rose by about 1.5% on Friday; just two days ago, Indonesia proposed a significant reduction in nickel ore production in 2026. The government's workplan budget for next year envisages production of about 250 million tons, far below this year's target of 379 million tons.

The planned production cuts are in response to the continued decline in nickel prices in recent years. Nickel is mainly used in stainless steel and electric vehicle batteries. The price of LME nickel has fallen by more than 3% since this year, and is the only non-ferrous metal traded on the London Metal Exchange (LME) that is expected to fall throughout the year. In addition to Indonesia, China has also increased production, which is growing faster than global demand. As a comparison, LME copper prices, which are regarded as a weather vane for the global economy, have risen more than 30% to record highs so far this year, and the vast majority of increases this year have occurred in nearly a month, while US copper futures prices are also on a strong record high.

In addition to benefiting from the sharp increase in demand brought about by the construction of AI data centers and the shift in global renewable energy and Trump's tariff pressure, the strong rise in copper prices has also benefited from the US dollar index (DXY), which has continued to weaken since this year — making it cheaper for commodity investors holding other currencies to buy metals such as copper. Furthermore, the downward trajectory of global interest rates dominated by the Federal Reserve and the European Central Bank since this year is also the core driving force behind copper prices.

Some commodity traders said that at a time when nickel prices have fallen close to the country's nickel production costs, Indonesia's plan poses “a major risk” for investors who are bearish on nickel metal. Other traders said that the withdrawal of some commodity traders from arbitrage transactions involving basic metals such as copper and aluminum, or achieving large-scale profit settlements from long positions in copper and aluminum may also contribute significantly to the rise in nickel prices this week.

In addition to proposing a reduction in mining production, according to Technoz reports, Indonesia's Ministry of Energy and Mineral Resources plans to revise the benchmark pricing formula for nickel ore in early 2026; this move will classify by-products such as cobalt as independent commodities subject to royalties. The media report quoted Meidy Katrin Lengkey, Secretary General of the Indonesian Nickel Miners Association, as an exclusive report.

Since this year, most industrial/non-ferrous metal prices have been rising sharply. For example, LME copper prices have risen by about one-third and hit a record high of $11,952 per ton last week.

Unlike the strong demand for copper and aluminum brought about by global tech giants such as Google and Microsoft in the context of a wave of large-scale AI data center craze, the industry boom corresponding to nickel demand simply cannot keep up with copper and aluminum.

Copper, the non-ferrous metal with the strongest gains this year, is widely used in various fields such as electricity, renewable energy transformation, traditional construction, industrial machinery, transportation, communications, and data center construction. These fields are at the core of global economic activity, so copper has the title of “Doctor Copper.” In the era of artificial intelligence and digital transformation, the construction of hyperscale AI data centers is showing explosive growth in demand for copper. High-speed copper cable interconnection systems for large-scale AI data centers currently being built by Microsoft, Google, Amazon, and Meta are highly dependent on copper as a non-ferrous metal for power transmission and computing power clusters, as well as cooling systems and high-performance electronic equipment. This new demand for structural data centers is gradually becoming a new demand growth engine in the copper market, and aluminum is more of a “secondary beneficiary” of the power grid equipment side and the substitution effect of rising copper prices.

The caliber given by INSG (International Nickel Industry Research Organization) is very clear—stainless steel accounts for about 65% of global raw nickel usage in 2023, and batteries account for 16%. In other words, the prosperity of nickel depends more on demand for stainless steel (related to the real estate/manufacturing cycle) and EV (electric vehicle) battery chemistry technology routes and EV sales growth rate, rather than the AI computing power industry chain with the highest boom in the global industry. Although long-term demand for electric vehicles under the energy transition trend is still very impressive, the current commodity market trading focus is clearly not at the EV transformation level. At the same time, many institutions expect that global nickel supply may continue to exceed demand in 2026 (however, changes in Indonesia's supply-level will be a key variable), which will also suppress nickel prices and the resilience of the nickel industry chain at the macro level.