Rising nickel prices reignite stainless steel cost concerns

A new Indonesian price policy has combined with supply chain issues caused by the Middle East crisis to reignite concerns that rising nickel costs will be a key driver of increased stainless steel prices.

Three months ago, nickel prices spiked, peaking at USD18,725 per tonne on January 29. The LME spot daily cash price soared from a low of USD14,110 per tonne on December 16 following the proposal of reduced ore mining quotas in Indonesia, the world’s largest producer of nickel.

Indonesia’s Ministry of Energy and Mineral Resources later confirmed plans to reduce the country’s annual nickel ore production quotas, by around a third, to 260-270 million tonnes. Nickel prices subsequently settled, remaining within a range of USD16,280-17,490 per tonne from the beginning of March to April 10.

Increased nickel costs may coincide with supply deficit

From April 15, however, further support was provided to nickel prices by the Indonesian Ministry of Energy and Mineral Resources’ implementation of a revised nickel ore benchmark price (HPM) formula. The new HPM raises the correction factor used to calculate the value of nickel in 1.6% grade nickel ore from around 17% to 30%. It also now incorporates the value of associated iron and cobalt, significantly increasing the cost of nickel ore.

The Middle East conflict is also raising stainless steelmakers’ nickel price expectations. Stalled shipping in the Strait of Hormuz is preventing the supply of sulphur to Indonesia’s nickel refinement companies, which rely on the Middle East for 75-80% of their supply. Sulphur is the main ingredient of sulphuric acid, a key input of the nickel refinement process. Reuters reported that recent supply chain interruptions have already forced Indonesian nickel processors to reduce production by more than 10%.

Widespread reporting of these increased risks to nickel supply coincided with a report by the International Nickel Study Group which forecasts increased nickel demand. The April 22 report said that global primary nickel consumption would increase to 3.75bn tonnes in 2026 – up from 3.60bn tonnes in 2025. However, forecast nickel production of 3.72bn tonnes in 2026, a reduction of 4.2% on 2025’s 3.88bn tonnes, would result in an overall deficit of 32,200 tonnes. This would be the first supply deficit since 2021, it said.

Nickel prices’ April acceleration

The LME spot daily cash price for Class 1 nickel has increased by 14.5% to USD19,270 per tonne between April 7 and April 27.

These increases are expected to raise stainless steel producers’ input costs, particularly for 300-series products. If nickel prices remain elevated, this is likely to prompt increased alloy surcharges in the United States, in June, and support further price rises in Europe and Asia. This will add to existing upward pressure exerted by increased energy and transport costs resulting from the Middle East crisis.

This month, MEPS’s research partners raised concerns about the wider economic implications of the US-Israeli war with Iran. In its assumptions, the International Nickel Study Group assumes that nickel demand from the stainless steel industry will increase, this year. However, MEPS respondents in the countries assessed for this report fear that widespread price inflation could stall previously expected interest rate cuts, reducing investment in stainless steel-consuming sectors.

The IMF has revised its global GDP growth forecast down from 3.4% to 3.1% for 2026 due to the ongoing Middle East conflict. Inflation, meanwhile, is now projected to reach 4.4% – up from 2025’s 4.1% rate.