Why I Turned Bullish on Nickel

Executive Summary#

Executive summary

A disciplined reversal that still produced a failed trade

On 29 January 2026, I reversed my November bearish nickel view and recommended a long at approximately $18,200–18,500 per tonne. The target was $18,500–20,000 over two to four months.

The reason for changing direction was not that the global surplus had disappeared. It was that the market had begun to price Indonesian production restraint, cost-curve stress and the possibility that low prices would force supply discipline. The setup appeared asymmetric after a sharp repricing from the November range.

The long did not work over the intended horizon. By 17 July 2026, LME three-month nickel was approximately $16,320–16,330 and opening stocks remained high at about 274,584 tonnes. The target failed, even though the formal 400,000-tonne inventory invalidation was not reached.

Original Thesis and Reversal#

The November thesis had been bearish because INSG projected substantial surpluses and Indonesian output was growing rapidly. By late January, nickel had risen above the original expected range.

Rather than treating that move as irrational, I re-underwrote the position. The new thesis focused on the factors that could interrupt the surplus:

Indonesian quota or export-policy changes
Producer losses and delayed project ramps
A market price near the higher-cost portion of the supply curve
Short covering after an extended bearish consensus
Continued demand for high-nickel batteries where energy density mattered

Changing the view was the correct process response to changed information. It did not guarantee that the new view was correct.

Positioning#

What Changed#

1. Indonesian Policy Became the Dominant Variable#

The earlier bearish work treated Indonesian production growth as persistent. By January, the market was more sensitive to the possibility of quota restraint and policy intervention.

In a concentrated market, a small change in expected output from the dominant producer can have a larger price effect than a gradual change in end demand.

2. Producer Economics Appeared Stressed#

The original presentation argued that some Indonesian high-pressure-acid-leach projects were cash-flow negative and cited a Western marginal cost around $17,000–18,000/t.

The statement that nickel at $18,200–18,500 was “below incentive cost” was too broad. Cost curves vary materially by product, ore, energy source, integration and financing. Low-cost Indonesian operations remained profitable below levels that challenged higher-cost Western projects.

The defensible thesis was that the price was creating asymmetric stress across the cost curve, not that the entire industry was below incentive economics.

3. Battery Demand Was More Nuanced Than the Bear Case#

LFP adoption reduced nickel intensity in mass-market EVs, but high-nickel chemistries retained advantages for range and energy density. The bullish view expected that the market had over-discounted this segment.

This was a secondary driver. Stainless steel remained the largest source of nickel demand, and battery chemistry alone could not overcome a large surplus.

4. Positioning Favoured a Squeeze#

A heavily bearish narrative can create tactical upside when policy headlines or supply cuts force short covering. The two-to-four-month horizon was therefore partly a positioning trade rather than a claim that the multi-year balance had structurally tightened.

Catalysts#

Principal Risks#

Outcome and Reflection#

The expected move to $18,500–20,000 was not sustained over the two-to-four-month horizon. By 17 July 2026, the LME official three-month bid and offer were approximately $16,320 and $16,330, below the original entry range. Opening stocks were approximately 274,584 tonnes.

Research Methodology#

The original reference range, target and invalidation conditions come from the 29 January 2026 Queen’s Tower Capital presentation. Current price and stock data are taken from the London Metal Exchange, while the continuing surplus context is checked against INSG.

Sources#

Originally researched and prepared by Srinivas Medida while serving as Commodities Sector Head at Queen’s Tower Capital, Imperial College Investment Society. Revised and expanded for publication on SM Research. Material public-market figures were checked against the sources listed below; contemporaneous presentation figures are identified as such. The investment view reflects the assessment made on 29 January 2026; the outcome section was updated on 19 July 2026. This material is provided for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any financial instrument.