By Bloomberg News

(Bloomberg) -- Nickel touched a fresh 19-month high in choppy trading as traders weighed rising inventories against mounting production risks that have fueled a breakneck rally in prices.

Three-month futures initially swung between small gains and losses Wednesday before briefly nudging up to the highest level since June 2024. On Tuesday, the metal notched its biggest gain in more than three years with an intraday surge of as much as 10.5%, propelled by risks to output in top supplier Indonesia, as well as a broad-based flood of investment in China’s domestic metals markets.

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Indonesia has flagged plans to reduce nickel production this year to better balance supply with demand. It’s also set to levy punitive fines on miners for violating forestry permits, which may bankrupt some firms and disrupt output.

In addition, buying requests from China for nickel pig iron have been more active than usual, according to traders based in Asia, who asked not to be named because the information is private, citing industry stocking ahead of Chinese Lunar New year.

Still, years of surging output from Indonesia have helped drive global inventories sharply higher, in a trend that’s kept nickel prices pegged back during a broader bull run in metals markets. There was fresh evidence of continued oversupply on Wednesday, as stockpiles tracked by the London Metal Exchange surged by the most since in six years.

A drop in nickel prices during Asian trading hours was fueled by profit-taking after Tuesday’s surge, which was “largely driven by financial capital inflows,” said Fan Jianyuan, an analyst at Mysteel Global. On a fundamental level, the nickel market remains in surplus, according to Fan.

Base metals have seen a strong start in 2026, with the LMEX Index that tracks the six main metals in London surging to the highest level since 2022, when the sector peaked.

In addition to the rapid advance in nickel, copper hit a record earlier this week due to tightening supply and trade dislocations linked to potential US import tariffs. Aluminum and tin both rallied to the highest level since 2022.

Nickel — which is used in stainless steel and batteries — was 0.3% higher at $18,585 a ton on the London Metal Exchange by 11:37 a.m. local time. Copper, aluminum, zinc, lead and tin declined.

--With assistance from Mark Burton.

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