Nickel Trading Guide: Markets and Applications

Global nickel production exceeds 3.3 million tonnes annually, with Indonesia now the dominant producer thanks to massive investment in nickel smelting capacity. The Philippines, Russia (Nornickel), New Caledonia, Australia, and Canada are other significant producers. Nickel demand has historically been driven by stainless steel (roughly 70% of consumption), but battery applications for electric vehicles are the fastest-growing demand sector.

The nickel market has undergone dramatic changes as the EV transition accelerates. Battery-grade nickel (Class 1, minimum 99.8% Ni) is required for lithium-ion batteries, while lower-purity nickel pig iron (NPI) and ferronickel serve the stainless steel industry. The diverging demand for different nickel products has created a two-tier market.

Class 1 nickel (99.8%+ Ni) includes electrolytic nickel cathode, briquettes, and powder — these are LME-deliverable and suitable for battery production. Class 2 nickel includes ferronickel and nickel pig iron (NPI), used exclusively in stainless steel. Nickel sulfate, produced from Class 1 nickel or mixed hydroxide precipitate (MHP), is the direct input for battery cathode manufacturing.

The distinction matters because not all nickel is equal for batteries. Converting Class 2 nickel to battery-grade material is technically possible but expensive. Indonesia's growing HPAL (High Pressure Acid Leach) capacity is producing MHP that can be processed into battery-grade nickel sulfate, bridging the gap between laterite ore and EV batteries.

The LME nickel price is the primary global benchmark, though its relevance to the physical market has been questioned since the 2022 short squeeze event. Physical nickel trades at the LME price plus regional premiums for Class 1 products. Nickel pig iron and ferronickel are priced independently, often on a per-nickel-unit basis.

Battery-grade nickel sulfate is increasingly priced using its own benchmarks, with Fastmarkets and other price reporting agencies publishing assessments. The premium of nickel sulfate over LME nickel metal fluctuates based on battery demand and conversion economics.

Indonesia's nickel ore export ban has forced massive investment in domestic processing, with Chinese and Indonesian companies building smelters, HPAL plants, and battery material factories. This has shifted nickel processing from traditional centers (Japan, Canada, Norway) to Indonesia, creating new supply chains for both stainless steel and EV batteries.

For traders, this means sourcing nickel products increasingly involves engaging with Indonesian-based producers and navigating the country's evolving export regulations. The environmental footprint of Indonesian nickel production (coal-powered smelters, HPAL waste management) is attracting scrutiny from automakers seeking to 'green' their supply chains.