The Class 1 nickel market is tightening as defense and aerospace demand accelerates. Defense sector consumption of high-purity nickel is estimated to have grown 12% year-on-year in the first half of 2026, driven by procurement of nickel-based superalloys for turbine engines, missile casings, and armor plating. NATO member defense budgets are up 8% year-on-year on average.
Aerospace demand provides additional support. Global aerospace superalloy demand is running at 98% of pre-pandemic (2019) levels, with Boeing and Airbus both increasing production rates. A single aircraft engine uses 1.5-3t of nickel-based superalloys. Airline delivery backlogs extend through 2030, providing visibility for sustained demand.
On the supply side, Russian producer Norilsk Nickel continues to deliver Class 1 material at stable volumes. No sanctions have been imposed on Russian nickel exports, though logistics costs remain elevated due to routing constraints. Canadian and Australian production is steady but not growing enough to meet incremental Class 1 demand.
The premium divergence between Class 1 and Class 2 nickel is widening. Class 1 (LME deliverable) is commanding $500-800/t premiums while the broader nickel complex is depressed by Indonesian NPI output. This bifurcation creates opportunities for physical arbitrage but also means the LME price does not fully reflect Class 1 tightness.
If you buy Class 1 nickel for aerospace or defense applications, the premium environment will likely persist through 2026. Lock in physical supply agreements with term premium caps. The $500-800/t premium over LME cash means the effective price is $18,140-18,440/mt for delivered material. Consider longer-term contracts with premium floors to protect against further tightening.