Australian nickel producers hit badly by Middle-East conflict, new report finds

• The impact of sulphur supply affects copper and, particularly, nickel in Australia.
• Government tips nickel industry rebound.
• Mines and metals continue to face global turmoil.
• U.S. tariffs haveing mixed effect.

Australia’s nickel sector is reeling from a significant impact related to the Middle East crisis. According to a metals and mining outlook half-time report produced by leading research firm Wood Mackenzie, the overall impact of the Middle East conflict on global markets has been surprisingly muted so far.

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However, tensions around the Strait of Hormuz have hit global supply chains hard, with the region accounting for more than 45% of seaborne sulphur export.

“The indirect impact of sulphur, compounded by China’s sulphuric acid restrictions, affects copper and particularly nickel in Australia,” the report found.

On a positive note, the Federal Department of Industry, Science and Resources (DISR) is now forecasting Australian nickel production will rebound as the global market moves into deficit from CY30.

The latest “Resources and Energy Quarterly,” released in early July, found that Australian nickel production declined in CY25 following a series of closures in CY24 amid price uncertainty and is expected to fall further through CY25–26 due to earlier curtailments and a lack of near-term project start-ups.

“Output will also decline as IGO’s Nova operation approaches end of life in late 2026. Despite recent suspensions, several projects remain in the pipeline, including developments targeting higher-value intermediates such as MHP and cobalt sulphate for battery supply chains,” the report noted.

“In February 2026, Ardea Resources’ Kalgoorlie Nickel Project secured up to $1 billion in conditional support from Export Finance Australia and the US Export-Import Bank to advance the Goongarrie Hub. Backed by a Japanese consortium, the project is progressing through feasibility and is well placed to benefit from tighter market conditions later in the outlook period.”

The report also suggested the WA government $15M interest-free loan program will support nickel producers, aimed at restarting idled operations and advancing new projects.

Loans are repayment-free until July 1, CY28, or until nickel prices exceed US$22,000 per tonne for two consecutive quarters – whichever comes first – with the principal to then be repaid interest-free over two years.

“Declining downstream output and the closure of Nova are expected to drive a sharp decline in Australia’s nickel export earnings, from $2.4 billion in 2024–25 to $1.3 billion in 2025–26 and $1.2 billion in 2026–27 in real terms.”

A modest recovery in prices and new domestic production capacity later in the outlook is expected to support a rebound in export values, rising to $1.7 billion by CY30–31.

Elsewhere, WoodMac reported that while oil and gas have been extensively affected by the conflict, metals and mining have seen a more limited impact.

“Shortly after the extent of the conflict became clear, we assessed repercussions across metals. This concluded that direct, primary effects were be limited to commodities and products concentrated in the Middle East. At the height of the conflict, the disruption was expected to result in a 2.5 to 3.0 Mt deficit in aluminium, whereas we now expect closer to 1.0 Mt,” the report explained.

“Approximately 32% of global direct reduced iron (DRI) production was affected, though relatively small compared to global steel.”

However, WoodMac says recent renewed conflict and ongoing trade restrictions are slowly starting to put upward pressure on inflation and threaten global growth.

“At the start of the year, we used the term ‘growth with guardrails’ to define our expectation of ongoing but more cautious metals supply growth in 2026,” the report noted. “In the event, supply build out for most metals has been stronger than we expected – even in copper, where surpluses are coming back in to balance.

“The exception is aluminium, where damage to facilities in the Middle East has weakened overall supply. The question remains, however, whether long-term investments in new projects can continue in an environment beset with short-term uncertainty.”

WoodMac has pointed to the U.S. mid-term elections as the next major milestone to watch.

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