Nickel's losing because the warehouses are too full

By Siam Sukkhee Trading Co., Ltd — 2026-07-11 — LME metals market analysis

I watched nickel futures fall off a cliff in June. Down 14% to $16,395 per tonne.

The warehouses filled up.

That's the whole story, really. Combined LME and Shanghai inventory hit 468,600 metric tonnes last month—roughly six weeks of what the planet actually consumes, all sitting certified and waiting. Biggest stockpile since 2015. That number does something simple and brutal: it kills the bull case.

Three months ago this looked different.

Back in spring, Indonesia announced a cut to its mining quota—from 379 million tonnes down to somewhere between 260 and 270. The paper market went mad. Supply fear, shortage narrative, the works. Prices climbed on the back of it. Traders kept buying because they were convinced that less ore meant higher prices had to follow. Simple math. Or it looked simple.

Then the inventory started arriving. Actually, that's not quite right—it had been arriving the whole time. LME stocks alone sat at 274,230 tonnes by June. The drawdown never happened like it should have. Discovery Alert noted that the build was steady across both exchanges, broad-based, not some anomaly. When the physical market is that well stocked you can't sell a shortage story. Not to anyone paying attention.

What actually broke the spell was Jakarta signalling—just signalling, mind you—that it would expand the quota back to 360 million tonnes by late July. Not confirmed. Just flagged.

But traders don't wait for confirmations. They reprice the moment the direction becomes clear, and the direction here is straightforward: more ore coming. The supply-panic premium that had been holding prices up just... evaporated. That's the 14% drop you're looking at.

What 468,600 tonnes actually means

It's a ceiling. Not a suggestion. Not a temporary thing.

For nickel to recover in any serious way, one of two things needs to happen. Either these warehouses start emptying out and refined stocks actually move into consumption. Or something has to pull enough demand forward that the surplus gets absorbed fast. The battery makers aren't doing it yet—not at scale. EV demand hasn't accelerated past the point where it's eating through Class 1 refined metal. And the stainless steel people, who are the real customers for most of the world's nickel, are stuck in a difficult market themselves, especially in China.

ING made a decent point on this. They said nickel's trapped between two different markets that aren't talking to each other. You've got genuine localized smelter squeeze in some spots—Indonesia, Sulawesi, those nickel pig iron producers are squeezed. But the LME and Shanghai warehouses don't care about that. The indices price off what's registered and certified, not what a smelter in Sulawesi is short of. So you get this strange divergence. Shortage in one place. Glut in another. Both true. Neither tells you what the price will do.

The honest position is that nickel's caught between two stories and neither one wins right now. There is a real structural thing happening—Indonesia genuinely is managing its resources differently than it used to, and that matters for supply over the next few years. Genuinely does matter. But that's not a three-month problem. The three-month problem is the one in the warehouse.

468,600 tonnes of registered nickel sitting on a dock somewhere, not moving. Six weeks of global consumption. That's not going anywhere fast, as far as I can tell. So the range you're looking at—$16,000 to $17,000, more or less—that's probably it for a while. Not a floor. A cage.

The quota matters eventually. Right now it doesn't.

Tags: LME Nickel, Indonesia nickel quota, SHFE inventory, nickel futures price drop 2026, LME SHFE combined stockpile 2026, nickel market surplus Q3 2026