Indonesia's Nickel Quota Reversal Just Cost Us 14% in One Month

By Siam Sukkhee Trading Co., Ltd — 2026-07-17 — LME metals market analysis

I watched the Bloomberg headline come through in late June and felt that familiar sinking feeling. Indonesia, the country that controls more than 60% of the world's nickel supply, was considering something truly stupid: raising its mining quota from 260 million tonnes to around 360 million tonnes.

By early July, the LME was down 14%.

This matters because six months earlier, Indonesia had actually done the sensible thing. They'd tightened the quota at the start of 2026, signalling that they were finally—finally—going to manage the oversupply problem instead of just talking about it. Prices responded. They climbed through spring. For a moment, you could almost believe that someone in Jakarta understood what happens when you flood a market with ore.

Then the reported reversal.

When a country controls that much supply, market logic becomes a bit like watching monsoon clouds gather. One policy signal and everything shifts. Actually, that's not quite right—it's worse than that. One rumoured policy signal, unconfirmed, and everyone moves at once. The whole April-to-June price recovery? Gone. Erased in three weeks.

Here's where it gets interesting, in a fairly grim way.

Indonesia's actual nickel ore production has historically run well below the approved quotas. Something like 379 million tonnes was approved last year. Real output came in considerably lower. Operational bottlenecks. Permitting delays. Infrastructure constraints. The gap between what the government allows and what actually gets dug out of the ground is not a small thing. It's a canyon. Yet the market priced in a supply surge anyway, based on a reported expansion that the Indonesian government later partially denied, claiming exceptions would only go to domestic smelters with immediate feedstock shortages.

Did anyone believe that?

The deeper problem is the oversupply story itself. This didn't start in June. Nickel's been drowning since 2023, when a wave of new Indonesian processing capacity—the high-pressure acid leach plants built to serve EV battery makers—began flooding the market with intermediates. Prices collapsed from above $30,000 per tonne in 2022 to the mid-teens by 2024. Indonesia created the problem and then, briefly, tried to fix it.

A mid-July recovery of 1.9% meant nothing. The damage was structural, more or less.

The real bind is this: the case for higher nickel prices still exists somewhere in the data. EV demand is growing. The deficit is supposed to narrow. But when your entire supply base answers to one country's policy signals, the fundamental case gets undermined by a single rumour before anything on the ground actually changes. The denial came too late. When you've been burned before, a "no, we're not doing that" sounds a lot like "we're still thinking about it."

Fear of Indonesian supply and the reality of Indonesian supply have never quite matched.

Tags: LME nickel, Indonesia, RKAB quota, Indonesia nickel mining quota 2026, nickel futures oversupply July 2026, LME nickel price drop Indonesia