The strong rally that propelled base metals higher has entered a brief pause, with nickel prices retreating from a 19-month peak.
The three-month nickel contract on the London Metal Exchange declined, following a dramatic surge of 10.5% on Tuesday that pushed it close to $18,800 per ton. This intraday gain was the largest single-day increase since late 2022, primarily fueled by two key factors: production risks in Indonesia, the world's top nickel supplier, and a substantial wave of investment flowing into China's domestic metals market.
Indonesian authorities have explicitly stated plans to curtail nickel output this year to better balance market supply and demand. The nation will also impose punitive fines on mining companies that violate forestry licensing regulations, a move that could potentially lead to bankruptcies for some firms and cause disruptions in nickel ore supply.
Furthermore, unnamed Asian traders revealed that procurement demand for nickel pig iron in China is more robust than usual, thanks to industry stockpiling activities ahead of the Lunar New Year. These traders chose to remain anonymous due to the commercial sensitivity of the information.
Since the beginning of 2026, the base metals sector has demonstrated remarkable strength. The London Metal Exchange Index (LMEX), which tracks the prices of six major metals, has climbed to its highest level since the sector peaked in 2022. Beyond nickel's rapid ascent, copper prices also hit a record high earlier this week amid market concerns that the US might impose tariffs on copper imports; simultaneously, aluminum prices rose to their highest point since April 2022.
Nickel is widely used in the production of stainless steel and batteries. As of 1:55 p.m. Shanghai time, nickel prices on the LME were down 0.8%, trading at $18,370 per ton. Prices for other base metals, including copper, aluminum, zinc, and lead, also moved lower.
Fan Jianyuan, an analyst at Mysteel Global, suggested that the current decline in nickel prices represents profit-taking following the previous sharp rally, noting that the prior increase was "largely driven by an influx of financial capital." He also pointed out that, from a fundamental perspective, the nickel market remains in a state of oversupply.
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