The bifurcation in the nickel market is deepening as Class I premium over nickel pig iron (NPI) widened to $3,800/mt, up from $3,200/mt in May and $2,500/mt at the start of 2026. Class I nickel (99.8%+ purity, LME-deliverable) is becoming increasingly scarce as battery sector demand draws down refined inventories.
LME Class I stocks stood at 74,460 tonnes on Thursday, down 25% from the March peak of 99,000 tonnes. The draw is accelerating as EV battery manufacturers increase nickel content in high-energy-density cathodes. Global EV sales rose 24% year-on-year in Q2 2026, with Chinese EV penetration reaching 52% of new car sales.
The Class I premium reflects the growing divergence between the NPI market (dominated by Indonesia's low-cost production, mostly supplying stainless steel) and the refined nickel market (serving the battery sector). NPI cannot be converted to Class I nickel economically at scale, leaving the refined market structurally tight.
New Class I supply from HPAL projects in Indonesia is ramping up but slower than expected. The Merdeka Battery Materials HPAL plant achieved nameplate capacity of 50,000 tonnes/year in May, but technical issues delayed the timeline by six months. Total Indonesian HPAL capacity is projected at 350,000 tonnes/year by end-2027, insufficient to close the battery-sector deficit.
The widening Class I premium signals that refined nickel supply for battery applications is structurally tight. Buyers of Class I nickel for cathode or specialty alloy applications should contract now, as spot availability is deteriorating. Lock in H2 2026 volumes at premiums no higher than $3,500-4,000/mt over LME. NPI is not a substitute for Class I.