Nickel Prices Hit Two-Year High on Indonesia Quota Cuts and Sulfur Shortage

Nickel prices climbed to their highest intraday level in nearly two years on April 27, 2026, as a combination of reduced mining quotas in Indonesia and a global sulfur shortage tightened the outlook for one of the world's most important battery metals. Three-month nickel futures on the London Metal Exchange briefly reached 19,565 dollars per ton, the highest level since June 2024.

The price rally has been driven by two converging supply shocks affecting the Indonesian nickel sector, which dominates global production. Indonesia accounts for over half of worldwide nickel output and has become indispensable to the electric vehicle battery supply chain.

Indonesian authorities have set 2026 nickel mining quotas at 250 to 270 million wet metric tons, a sharp reduction from the 379 million tons permitted in 2025. The cut comes alongside a revised pricing formula for nickel ore that took effect on April 15, 2026, raising the floor price used to calculate taxes and royalties on ore sales. The new framework increases costs for processors and pressures producer margins across the country.

The second factor squeezing supply involves sulfur, an essential reagent for processing nickel ore into battery-grade material. The ongoing Iran war has disrupted sulfur supply from the Middle East, where Indonesian processors source roughly 75 to 80 percent of their requirements. Sulfur prices have surged in tandem with the conflict, forcing several Indonesian plants to scale back operations.

At least three major nickel processors have trimmed output by a minimum of 10 percent since March 2026 due to the sulfur crunch. The affected facilities include plants backed by Chinese groups Huayou Cobalt, Lygend Resources, and Tsingshan Group. Many of these operations had previously been running above nameplate capacity due to wide profit margins and strong demand from battery manufacturers.

Zhejiang Huayou Cobalt announced a temporary production halt at its Indonesian facility starting May 1, 2026, with output expected to drop by approximately half due to surging sulfur input costs. French mining company Eramet has also suspended operations at one of its Indonesian sites after exhausting its ore allowance under the country's permit and quota system.

The disruption primarily affects mixed-hydroxide precipitate (MHP) production, a critical feedstock for electric vehicle battery materials. Indonesia's high-pressure acid leach (HPAL) producers supply approximately 14 percent of global nickel output and rely heavily on sulfuric acid for processing. Chinese nickel sulfate producers represent the primary downstream customers for Indonesian MHP, creating a direct transmission mechanism for any production cuts to reach global battery supply chains.

Since the start of the Iran war in late February 2026, nickel futures have risen by approximately 10 percent. Analysts at S&P Global expect prices to remain elevated throughout 2026 as the dual pressures from Indonesian production cuts and sulfur supply constraints continue. Morgan Stanley analysts have highlighted that HPAL producers face significant challenges from higher sulfur costs and tighter supply conditions.

The supply tightness has implications well beyond nickel itself. Concerns have also emerged about copper leaching operations in Africa, which similarly depend on sulfuric acid for processing. The cascading effects of sulfur scarcity could reshape multiple critical mineral supply chains.

For the electric vehicle industry, the timing of these disruptions is particularly sensitive. Automotive manufacturers planning vehicle launch schedules and production ramps depend on stable battery material costs and availability. Sustained nickel price increases could affect battery cell pricing and ultimately reach consumer vehicle prices.

The Indonesian government has positioned the quota reductions as a policy tool to support metal prices and increase the value captured domestically from the country's mineral resources. However, the timing has coincided with external supply shocks that have amplified the impact on global markets.

Stainless steel manufacturers, the traditional largest consumers of nickel, also face higher input costs. Combined with battery sector demand, this creates upward pressure on nickel pricing across multiple end markets. Industry observers are watching closely for further developments in both the Iran conflict and Indonesian mining policy. Any extended disruption to sulfur supplies or additional Indonesian production curbs could push nickel prices even higher in coming months.