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UBS Sees Nickel Market Shifting to Deficit on Indonesian Policy Changes, Names Top Stock Picks
Summary
Analysts at UBS report that Indonesian regulatory shifts are poised to flip the global nickel market from a surplus to a modest deficit, identifying Vale Indo and Merdeka Battery as key beneficiaries.
A series of policy changes in Indonesia is fundamentally altering the global nickel supply outlook, prompting analysts at UBS to forecast a market shift from surplus to a modest deficit and to name their top stock picks in the sector.
After a period of considerable surplus from 2022 through 2025, the nickel market is now facing a supply contraction driven by Indonesian regulatory actions, according to a UBS report.
Indonesian Policy Reshapes Supply
UBS identified several key regulatory developments in Indonesia that are tightening the global supply of nickel. These include:
- A ban on new smelter licenses.
- Restrictions on ore quotas for saprolite, a type of nickel-rich ore.
- Production cuts for nickel pig iron (NPI) and matte as power is reallocated to aluminum smelting.
- Reductions in high-pressure acid leaching (HPAL) output due to sulfur shortages and higher costs for limonite ore.
While the firm noted that Indonesian policy can be unpredictable, it believes these measures are intended to prevent persistent market surpluses rather than to engineer significant, long-term deficits.
Market Outlook and Price Forecast
AdThe anticipated supply contraction is expected to push the market into a modest deficit. However, UBS analysts believe the potential for a sustained price rally will be limited. High existing inventories, combined with the possibility that Indonesia could relax quotas or restart idled capacity, are likely to cap nickel prices.
As a result, UBS sees a limited likelihood of prices sustainably breaking above $20,000 per ton. The firm also stated a preference for miners with exposure to Class-2 nickel over those focused on Class-1 and chemicals.
UBS Top Stock Selections
In light of the changing market dynamics, UBS highlighted two producers positioned to benefit:
- Vale Indo (INCO): Named as UBS's top pick, the company is seen as a primary beneficiary due to its significant operations within Indonesia, the epicenter of the supply shifts.
- Merdeka Battery (MBMA): Ranked as the second choice, Merdeka's operations align with UBS's preference for Class-2 nickel exposure, positioning it well for the current market environment.
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