The global electric vehicle battery market is undergoing a structural shift toward LFP chemistry, with implications for nickel demand that the surplus market has partially obscured. LFP batteries now represent approximately 42% of global EV battery capacity installations, up from 36% in 2025 and just 27% in 2023. The shift is driven by cost — LFP cathodes are roughly 30% cheaper per kWh than NCM — and by supply chain simplicity, as they eliminate exposure to nickel and cobalt prices.
Chinese EV sales growth decelerated to roughly 20% year-over-year in Q2 2026, down from 30% in 2025 and over 40% in 2024. The slowdown reflects market maturation in China and reduced subsidy intensity. Critically, the EVs being sold in China are increasingly LFP-powered. Chinese automakers BYD, the world’s largest EV producer, uses LFP batteries in over 90% of its vehicles. Even Western automakers, including Tesla and Ford, have adopted LFP for standard-range models.
Battery-sector nickel demand is estimated at roughly 480,000 tonnes in 2026, up from 420,000 tonnes in 2025 — growth of 14%. But this is slower than the 25%+ growth rates projected two years ago. The deceleration is entirely attributable to the LFP shift. If NCM batteries had maintained their 2023 market share, battery nickel demand would be closer to 550,000 tonnes in 2026.
The practical consequence for the nickel market: Class 1 nickel (LME-deliverable briquettes and powder) premiums have narrowed. The Class 1 premium over nickel pig iron has fallen to roughly $300 per tonne, down from $500 in Q1 2026. The battery sector’s appetite for high-purity nickel is growing, but not as fast as the nickel supply response. This is part of why the nickel surplus persists despite production cost pressures.
The LFP shift is a structural headwind for nickel demand growth, but don’t over-extrapolate. Even at 42% LFP share, nickel-rich NCM batteries still represent 48% of the market, and that share is higher in Western EVs and premium vehicles. Battery nickel demand is still growing at 14% annually — just not at the 25%+ rates that justified the supply boom. For procurement teams, the takeaway is: the nickel surplus is real, but the supply response to low prices (Indonesian ore quotas, producer cutbacks) combined with still-growing battery demand means the surplus could narrow faster than consensus expects in H2 2026 and 2027.