Following the severe drought that forced mines in Indonesia to scale back production, nickel has rallied, jumping 2%.
TD Securities analysts note that the market, at the moment, has sufficient supply, on the back of production quotas initiated by the Indonesian government. If drought conditions worsen and begin to constrain nickel production, the market could tighten, adding further upside pressure on prices.
“It is our view that the market remains adequately supplied following recent quota increases, and a confirmed long-term supply outage may be needed to catalyse a break materially above US$17,000 per tonne,” the financial firm says.
Trading sentiment from China on the Shanghai Futures Exchange (SHFE) shifted sharply with supply expectations in 2026. From March 2026, top traders covered shorts. By June, “SmartMoney” funds started building long positions on the view that government quotas would hold firm, potentially tightening supply.
Reports in late August of undisclosed quota increases eased fears of a deficit. This was particularly relevant for the Weda Bay Industrial Park in Indonesia which had suspended operations after hitting its original allocation.
Overall, SHFE positioning now reflects how local players are weighing quota policy, potential weather disruptions, and broader supply dynamics.
While global nickel markets are being shaped primarily by Indonesian quotas, drought-driven production risks, and shifting SHFE sentiment, the implications cascade down to junior explorers who often operate at the front end of supply, capitalising when policy or weather shocks tighten availability.
As majors face quota ceilings or operational disruptions, juniors can highlight their exploration pipelines as potential sources of future supply, offering investors leverage to price volatility and the broader push for diversified, resilient critical minerals supply chains.
Mulga Tank discovery anchors Australia’s nickel future
Western Mines Group (ASX:WMG) is advancing the largest nickel sulphide deposit found in Australia — and one of the global top 10 — the Mulga Tank nickel sulphide discovery based in Western Australia.
Mulga Tank contains a 2025 mineral resource estimate (MRE) of over 5.3 million tonnes of contained nickel and is outlined as a belt-scale opportunity across 425km2 on the Minigwal Greenstone Belt.
Recent assays have confirmed the uplift of the basal portion of the Mulga Tank Complex to higher levels. Results show broad zones of nickel sulphide mineralisation with elevated nickel, sulphur, and chalcophile elements.
These results also confirm that the southwestern section of the main body is the most uplifted portion of the complex.
Western Mines Group notes that large, ‘lower-grade’ nickel sulphide will become essential to global supply to the West, with Canada Nickel’s (TSX-V:CNC) Crawford Project leading the way on this.
Western Mines’ current drill programs are focused on a three-year starter pit, noting that the initial resource is robust enough to commence. Further exploration will focus on finding near surface zones of above 0.40% nickel material in order to optimise the net present value and payback for an eventual mine plan.
Muskox Project targets Canada’s next nickel camp
SPC Nickel (TSX-V:SPC) is focused on Canada’s next generation of copper-nickel projects, with the Muskox Copper-Nickel-Platinum Group Metals (PGM) Project in Nunavut.
Muskox covers 496km2 of the Muskox intrusion and is reported to share geological similarities with more established nickel-copper camps such as Sudbury, Voisey’s Bay, and Norilsk.
SPC Nickel is positioning for a focused 2027 drill campaign at Muskox, following 2026 field programs that established drill-ready targets. The 2027 program will include a deep-penetrating ground magnetotelluric survey, a ground electromagnetic survey, and archaeological and field mapping programs, refining the results of an airborne survey from 2025.
Gochager Lake expands with new nickel zones
Fathom Nickel (CSE:FNI) is also focused on a polymetallic project in Canada, spearheaded by the Gochager Lake Project in Saskatchewan.
Fathom has recently released its MRE for Gochager Lake with an indicted resource of 858,701 tonnes @ 0.41% nickel (Ni), 0.12% copper (Cu), and 0.03% cobalt (Co), with a ‘higher-grade’ portion comprising 192,144 tonnes grading 0.78% Ni, 0.21% Cu, and 0.06% Co, as previously reported.
Beyond the MRE, new zones of nickel-copper-cobalt mineralisation have been unveiled to the southwest of the Gochager Lake deposit, with grades above 1% nickel in zones of increased sulphide abundance.
Fathom Nickel is continuing to integrate all new data in order to gain a better understanding of the geological setting of Gochager Lake and its new exploration targets.
As the market weighs further drought risks in Indonesia against exploration pipelines in Australia and Canada, the next phase of nickel’s trajectory will hinge on how quickly new discoveries can be advanced into scalable projects.
Write to Amy Rotman at Mining.com.au
Main image: Western Mines Group
