Nickel has staged a sharp momentum-driven rally, rebounding close to 30 percent since mid-December and trading into the high-$18k range. The move has progressed rapidly, breaking aggressively through levels that would normally be expected to act as technically significant resistance. While early momentum was initiated by Asia-linked flows, the rally has been globally reinforced, with European hours extending and validating price discovery rather than reversing it.
Despite the strength of price action, the balance of evidence suggests the move is now entering its later stages absent a fresh catalyst. This remains a financially driven rally rather than the start of a new structural bull market. Physical fundamentals remain loose, inventories are rising, and most participants view upside as tactical and time-limited. The $19–20k zone is increasingly framed as a potential exhaustion area, beyond which risk–reward shifts toward a medium-term structural short.
What has driven the rally
The rally in nickel should be understood primarily as a systematic and relative-value catch-up, rather than a response to changes in physical balance.
CTA positioning data shows nickel had been a deeply entrenched short for much of the past year, making it a natural funding leg against stronger performers such as copper and aluminium. As the broader base metals complex moved into a risk-on regime and technical thresholds were breached, CTAs began covering shorts and flipping long. This shift was mechanical, volatility-sensitive, and largely indifferent to fundamentals. Lead, another long-standing underperformer and common short leg in relative-value baskets, has exhibited a similar though less volatile pattern, reinforcing the view that recent price action reflects systematic beta re-engagement rather than metal-specific repricing.
Asia-linked flows provided the initial directional impulse. Rapid gains in nickel and stainless futures created significant dislocations versus upstream physical pricing, particularly high-grade NPI. This opened a futures–physical arbitrage that pulled NPI prices higher via hedging and spread positioning rather than end-use demand. High-grade NPI, especially higher-nickel-content material, acted as a hedgeable input into futures-linked positioning due to its predictable nickel content and stable linkage to stainless steel cost structures. Traders bought high-grade NPI while selling nickel futures, locking in the differential. As these arbitrage positions were established, the long physical NPI leg initially validated the futures-led move by reducing near-term selling pressure, allowing momentum to persist across sessions and venues.
Indonesia-related rhetoric provided an additional catalyst to this already evolving positioning dynamic. Headlines around ore caps and quota discipline helped validate the move and extend momentum. Though details remain unclear, recent policy signals, including the shortening of mining quota validity periods, suggest a focus on restraining future growth and maintaining regulatory flexibility rather than implementing outright production cuts. In this sense, Indonesia policy acted as an accelerant to a rally already underway, rather than its primary cause.
What is not driving the rally
There is little evidence that the rally reflects a tightening of physical fundamentals.
The market remains structurally oversupplied. LME inventories, particularly in Asia, continue to rise, indicating that material availability is not constrained and that surplus units are being absorbed into exchange systems rather than pulled into consumption.
Chinese stainless demand remains seasonally weak. End-use consumption is in the off-season, with large mills largely stocked ahead of holidays. Support for NPI prices has been driven primarily by futures-led arbitrage and spread positioning rather than organic demand growth.
Commercial behaviour remains defensive. Producers have been increasing forward hedging into higher prices, consistent with comfort around supply availability rather than concern over shortages.
Indonesia and the strategic price constraint
Indonesia is widely viewed as an active supply manager rather than a passive price taker, with policy incentives geared toward maintaining control over the structure and economics of the nickel market rather than maximising spot prices. Market commentary suggests prices in the mid-$15k range are broadly compatible with domestic margins and downstream investment objectives. Prices materially below this range compress margins, while sustained prices above the high-$18k area risk altering global supply incentives and diluting Indonesia’s strategic leverage.
This does not imply intolerance for short-term overshoots. Brief moves above preferred levels can be tolerated and may even be useful in restoring margins or resetting sentiment. However, as prices overshoot, the incentive increasingly shifts toward tempering the rally through policy signalling rather than endorsing a durable high-price regime. As a result, elevated prices are more likely to trigger a policy response than a meaningful or sustained external supply response.
Near-term outlook and risk–reward
We see the nickel rally beginning to stall as prices attempt to extend further, reflecting the financial rather than fundamental origins of the move driven by CTA and systematic participation. However, the deeper context should not be ignored, specifically the ongoing uncertainty and regional fragmentation of metals markets, which continues to attract attention and capital from risk managers across a broad spectrum of trading and investment participants.
In the near term, momentum and headline risk remain dominant. A sustained hold or close above the high-$18k area could mechanically extend the move toward $19–20k, particularly if reinforced by further Indonesia-related headlines on mining quotas.
However, upside at these levels is widely viewed as fragile. CTA positioning has largely normalised from extreme shorts, relative-value shorts have been unwound, and arbitrage has already tightened futures–physical dislocations. As a result, the market is no longer characterised by latent short exposure, reducing the risk of a disorderly short-covering extension. Most participants leaning into the rally are doing so tactically and often hedged, with limited appetite to add structural length at elevated prices.
At or near $20k, multiple participants identify a clear shift in risk–reward, with structural oversupply, rising inventories, weak end-use demand, and producer hedging making this zone attractive for a medium-term structural short on a few-months-forward view.
This article is intended for general information purposes only and reflects the market environment at the time of writing. It does not constitute investment advice, a personal recommendation, or an offer to engage in any trading activity. The content does not take into account individual objectives or circumstances and should not be relied upon as the basis for any investment decision. Past performance is not a reliable indicator of future results.
Content may have been created by persons who have, have previously had, or may in the future have personal interests in securities or other financial products referred to therein. All conflicts and potential conflicts relating to our business are managed in accordance with our conflicts of interest policy. For more information, please refer to our Summary of Conflicts of Interest Policy.
For more information and important risk disclosures, please see our Derivative Product Trading Notes and Privacy Policy. AMT Futures Limited is authorised and regulated by the Financial Conduct Authority.