TRADE REVIEW: Asian nickel market faces Q1 pressure as oversupply outweighs output cuts

This report is part of the S&P Global Energy Metals Trade Review series, where we dig through datasets and digest some of the key trends in iron ore, metallurgical coal, copper, alumina, cobalt, lithium, nickel and steel and scrap. We also explore what the next few months could bring, from supply and demand shifts to new arbitrages and quality spread fluctuations.

The Asian nickel market is expected to remain under pressure in the first quarter of 2026, despite Indonesia's efforts to control mining production, due to oversupply, according to market sources.

Market participants anticipate limited upside from nickel-manganese-cobalt battery demand because of a shift toward nickel-free lithium-iron-phosphate batteries, as NMC batteries typically have higher production costs than LFP batteries.

S&P Global Energy CERA projects that the nickel market will remain in surplus by 179,000 metric tons through 2026, before transitioning to a deficit of 2,000 mt by 2032.

^{Nickel ore imports drop}

Nickel ore inflows in China, the world's biggest importer of the commodity, fell 28.7% month over month to 3.34 million mt in November, but rose 2.9% year over year, according to Chinese customs data.

The Philippines remained China's top supplier, shipping 3.02 million mt in November, down 30.5% month over month but up 4.7% year over year. Chinese market sources said low stainless steel demand in the country and subdued buying interest for Philippine ore during its rainy season limited trading activity during the month.

Meanwhile, on Dec. 19, Indonesia, the world's largest nickel ore producer, announced plans to reduce nickel output in 2026 to support prices.

Supply uncertainty intensified as Vale Indonesia halted mining operations Jan. 2 due to a delay in approval of its 2026 work and budget plan.

Industry experts have said that the supply-side measures alone would be insufficient to stimulate demand.

Platts, part of S&P Global Energy, assessed high-grade 1.6% nickel ore at $62.5/wmt on Jan. 14 on a CIF China basis, down $1.5/wmt from Oct. 1, 2025.

Platts assessed low-grade 1.3% nickel ore at $40.9/wmt on Jan. 14, down $1.3/wmt since the start of the fourth quarter of 2025.

NPI prices rebound

Prices of nickel pig iron, made by processing nickel laterite ore and primarily used in stainless steel production, have rebounded after Indonesia announced the output reduction Dec. 19.

NPI prices were under pressure as China's stainless steel production, which accounts for two-thirds of the country's primary nickel demand, decelerated in November following a seasonal peak in September and October, according to analysts at CERA.

Platts assessed daily spot NPI with 10% nickel content at $128/mtu FOB Indonesia on Jan. 14, up 9.4% since the beginning of Q4 2025.

A Ningbo-based trader observed an increase in spot market inquiries in December, attributing it to year-end restocking in the downstream sector and suggesting that the NPI market might have reached a short-term peak.

Sellers have expressed optimism about Q1 restocking demand, driven by improved sentiment and increased price acceptance among downstream buyers.

Market participants said they continue to navigate uncertainty while closely monitoring ongoing developments regarding Indonesia's nickel output plans.

MHP payables rise

Mixed hydroxide precipitate payables -- the percentage of the contained metal value (nickel and cobalt) that buyers agree to pay for -- rose throughout Q4 2025, supported by robust downstream nickel sulfate demand and tighter cobalt supply.

MHP, produced from laterite ore via hydrometallurgical processes such as high-pressure acid leach, or HPAL, contains nickel and cobalt, making it a key feedstock for battery precursor materials used in electric vehicle batteries.

Platts assessed MHP CIF North Asia, basis London Metal Exchange nickel, at 89.9% payables on Jan. 14, up from 88% since Oct. 1. The all-in price at $13,373/mt, calculated from the payable basis LME nickel, rose $42/mt since the start of Q4 2025.

Producers began preselling first-quarter MHP cargoes as early as late October, with January and February volumes fully booked at around 90% payables, while March volumes remain largely unsettled, according to a Zhejiang-based trader.

A Zhejiang-based consumer indicated that six new HPAL projects scheduled for 2026 could add over 400,000 mt/y of nickel in additional MHP capacity, potentially exerting downward pressure on payables. However, rising sulfur costs -- a critical input for HPAL -- may slow project ramp-up or prevent full utilization, thereby tempering the bearish impact, according to the consumer.

Nickel sulfate volatility

Downstream, prices of nickel sulfate -- created by dissolving MHP or other intermediates and refining them into battery-grade material -- reached their 2025 high of Yuan 28,450/mt ($4,011/mt) on Oct. 24, fueled by tight supply resulting from some refinery maintenance in September, elevated MHP costs and stronger demand for mid-nickel-manganese-cobalt oxide batteries during the seasonal peak in September and October.

The rally reversed in November as supply increased and orders declined, with the NMC sector entering its off-season.

Automakers are shifting from high-nickel NMC batteries to mid-nickel NMC within the NMC segment, primarily due to cost considerations. Additionally, there is a growing trend away from NMC batteries altogether in favor of lithium-iron-phosphate batteries.

China's NMC battery sales totaled 306 GWh in the first 11 months of 2025, accounting for just 21% of the market -- a 5% decrease year over year, according to the China Automotive Battery Innovation Alliance. In contrast, LFP battery sales reached 1,160.8 GWh, representing 79% of the market and marking a 5% year-over-year increase.

Platts assessed nickel sulfate at Yuan 30,700/mt ($4,378/mt) on Jan. 14, up 9.3% since the start of Q4 2025.

Seasonal demand slows

Market participants expect seasonal demand weakness in Q1 nickel markets, as procurement activities have largely concluded, and additional price pressure is anticipated due to the reduction of China's purchase tax exemption for new energy vehicles from Jan. 1.

The policy shift is likely to have accelerated EV demand from Q1 2026 into Q4 2025.