The International Nickel Study Group now forecasts a 19,000-tonne primary nickel surplus in 2026, replacing the 32,000-tonne deficit it projected in April. Its October forecast also shows a 70,000-tonne surplus in 2027. These are estimated annual balances, not measured inventory changes or price forecasts. October release, April release.
The revision weakens a straightforward shortage argument. It also leaves a market close enough to balance that changes in supply or demand could alter the conclusion. Our view is that neither a confident bullish call nor a declaration of permanent oversupply follows from these figures alone.
Production expectations have risen faster than usage
INSG’s 2026 production forecast has increased from 3.715 million tonnes in April to 3.868 million tonnes in October. Expected usage has risen from 3.747 million to 3.849 million tonnes. Calculated from those published figures, the upward revisions are 153,000 tonnes for production and 102,000 tonnes for usage. Both sides grew; expected supply grew more.
The new surplus is approximately 0.5 per cent of forecast usage, calculated as 19,000 divided by 3.849 million. INSG flags uncertainty around Indonesian production and does not include an adjustment for possible production disruptions. Forecast assumptions.
A residual that small deserves modest confidence. If actual production fell below the forecast, or usage exceeded it, the market could tighten. If supply proved stronger or demand weaker, the surplus could expand. Neither scenario requires us to assume a dramatic change in the whole industry.
An investor whose return depends on a sustained shortage now needs to revisit the model. A producer that can earn an acceptable return at conservative prices has less need to predict which side of balance the final annual estimate will land on.
A tonne in the balance is not a delivery warrant
The LME’s nickel contract specifies high-purity primary nickel and particular deliverable forms. Its physical specifications include a minimum 99.80 per cent purity under the stated ASTM standard, with an alternative specified Chinese standard. The annual global balance covers a broader market than a single exchange contract. LME specifications.
The product distinction matters when interpreting a local shortage or a rise in exchange stocks. A customer needs suitable material in the right place, under workable terms. An aggregate annual surplus does not demonstrate that every buyer can obtain the required material promptly. Equally, tight conditions in one product do not establish that every nickel producer will receive a higher realised price.
For a mine or processing project, our preferred questions concern the actual product, its payable nickel content, conversion costs and customer requirements. Applying an exchange quotation directly to all contained nickel can give an investor a misleading revenue estimate.
The battery story needs another check
INSG continues to describe slower-than-anticipated development of nickel’s battery role amid competition from lithium iron phosphate chemistry. It also expects continued stainless-steel growth. Those observations give investors reasons to examine the end-use mix instead of treating nickel demand as a direct proxy for electric-vehicle sales. October market observations.
Our constructive case is that improving industrial demand and constrained supply could support better conditions for efficient producers. The counterargument is that additional output or weaker demand could absorb that improvement before higher-cost operations earn an adequate margin. A smaller surplus can coexist with difficult economics at an individual mine.
For anyone comparing nickel with coal, iron ore or gold for cash returns, we would start with cash after the spending needed to keep the business running. Then we would examine debt, ownership interests, development commitments and the price paid for the equity. A low share price and a nearly balanced commodity market do not complete that work.
For a proposed investment, the next useful calculation is the return at a price the operation can survive if INSG’s small surplus turns out to be larger. A favourable result would be a stronger reason for interest than the hope that the next forecast changes sign again.