The nickel market is increasingly two separate markets. Class 1 nickel — briquettes, cathodes, pellets — commands a $1,200-1,500/t premium over Class 2 products like nickel pig iron (NPI) and mixed hydroxide precipitate (MHP). Only about 40% of global nickel output qualifies as Class 1 for LME delivery, and that share is shrinking as Indonesian NPI and MHP capacity expands.
Indonesian NPI is priced at an estimated $14,800-15,500/t nickel-equivalent, reflecting substantial oversupply. Chinese NPI buyers are paying discounts of $2,000-2,500/t versus LME cash, the widest discount since 2023. MHP prices for battery supply chain buyers sit at 82-85% of LME nickel, down from 90% in early 2025.
Class 1 supply is constrained by capacity closures in traditional refining regions. BHP's Nickel West is operating at reduced capacity. Glencore's Sudbury operations face labor negotiations. New Caledonia's Prony Resources is under financial strain. These supply-side pressures, combined with growing demand from aerospace superalloys and defense applications, keep the Class 1 market tighter.
The LME is facing questions about its nickel contract relevance as Class 1 market share declines. Exchange volumes remain healthy at 35,000-40,000 lots/day, but the growing Class 2 overhang means LME prices increasingly reflect only the premium tier of the market.
For battery supply chains, the shift toward MHP-direct cathode production is reducing dependence on Class 1 nickel. Several Chinese precursor cathode active material (PCAM) producers now source directly from Indonesian HPAL plants, bypassing the nickel exchange entirely. This structural shift means LME nickel is becoming a less relevant benchmark for the battery supply chain.
The nickel market bifurcation means you need two procurement strategies. For stainless steel buyers: source NPI or ferronickel on a discounted basis from Indonesia — don't pay LME-linked prices for Class 2 material. For battery or aerospace buyers needing Class 1: the premium is likely to persist. Lock in Class 1 volumes with term contracts at agreed premiums over LME cash. LME nickel alone is no longer a reliable benchmark for most non-Class 1 procurement.