Class I nickel supply — the high-purity nickel (>99.8%) traded on the LME — is facing structural tightening as the battery sector competes for intermediate feed with the traditional stainless steel market. The battery sector's demand for nickel in nickel sulfate and MHP has grown approximately 35% year-on-year, driven by lithium-ion battery production for EVs and energy storage.
The competition for feed creates a bifurcation in the nickel market. MHP, the preferred intermediate for battery applications, can also be converted into Class I nickel through matte processing. As battery demand absorbs more MHP supply, less is available for downstream processing into LME-grade nickel, tightening the Class I market.
Nickel sulfate premiums over LME nickel have widened to approximately $300-500 per tonne, reflecting the battery sector's willingness to pay above exchange prices for suitable feedstock. This premium incentivizes producers to direct intermediate output to the battery supply chain rather than the LME.
Indonesia's quota cuts directly constrain MHP supply expansion. MHP production from Indonesian HPAL plants had been the primary source of battery-grade nickel supply growth, but reduced ore quotas limit the feedstock available for these operations. Several HPAL expansion projects have been delayed or scaled back.
On the stainless steel side, demand is growing at a steady 3% annually, driven by construction, industrial equipment, and specialty alloys. Stainless accounts for approximately 65% of global nickel consumption, providing a stable demand base even as the battery sector captures a growing share.
The Class I nickel market is tightening structurally as battery demand competes for intermediate feed. If you buy LME-grade nickel, expect premiums to persist. Consider direct offtake agreements with MHP producers that have Class I conversion capability to bypass the exchange premium. For stainless steel buyers, the Class II (NPI) market remains well-supplied, though Indonesian quota cuts will push costs higher.