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May 11 (Reuters) - Goldman Sachs raised its 2026 average nickel price forecast to $18,500 per metric ton from $17,200 on Monday, citing tighter Indonesian supply due to reduced ore quota allocations and sulfur shortages.

Benchmark three-month nickel CMNI3 on the London Metal Exchange was up 1.6% to $19,200. On May 6, prices touched $20,000, their highest level since May 2024. MET/L

Indonesia, which had flooded global markets with nickel, is now tightening supply through lower mining quotas, while sulfur shortages are also affecting some producers.

Goldman Sachs expects Indonesian refined nickel supply to fall by 1% year-on-year in 2026, marking the first decline in a decade.

It still expects Indonesia to approve supplementary ore quotas in the third quarter, along with some supply normalisation in the second half of the year, pushing prices down from a second-quarter peak of $19,250 toward $18,500 by the fourth quarter.

However, Goldman noted that risks remain skewed to the upside if sulfur shortages persist beyond June and lead to broader high-pressure acid leach (HPAL) curtailments of a further 50,000 tons.