Nickel Sulfate in 2026: the EV battery feedstock the market forgot to worry about

Nickel sulfate does not trade on any exchange. It has no warehouse warrants, no futures curve, no margin calls. It is a chemical intermediate — a pale green crystal that gets dissolved, precipitated, and baked into the cathode active material that powers roughly 80% of EV batteries sold outside China. And right now, it is the nickel market's most overlooked story.

LME nickel has rallied hard in 2026 — up 21% year-on-year to $18,880/tonne as of May 22 — driven by Indonesia's surprise mining quota cuts and the International Nickel Study Group's revision to a 32,000-tonne global deficit. But the sulfate market is telling a more complicated story. Platts assessed battery-grade nickel sulfate (22% Ni min, 100 ppb magnetic material max) at Yuan 25,750/mt ($3,603/mt) DDP China in mid-2025, and prices slid through the second quarter on weak downstream cathode demand. In May 2026, spot sulfate continues to trade at a narrowing discount to LME-equivalent nickel content, reflecting a market that is well-supplied in the near term but structurally tightening beneath the surface.

The disconnect is simple: nickel sulfate is not LME nickel. Class 1 nickel metal can be melted, cast, and warrantied. Sulfate must be chemically qualified, impurity-tested (cobalt below 50 ppm is a hard spec for Japanese and Korean pCAM producers), and certified by the cathode manufacturer before a single tonne enters the supply chain. That qualification process takes months and creates stickiness that spot LME trades simply do not capture.

On the demand side, NCM cathode chemistry is far from retreating. The global Nickel Cobalt Manganese (NCM) market is valued at $6.0 billion in 2026 and projected to grow at 14.3% CAGR to $15.3 billion by 2033, according to Persistence Market Research. Outside China, nearly 80% of EV batteries still use nickel-containing chemistries, and the trend toward higher-nickel formulations (NCM 811 and above) actually increases nickel sulfate intensity per kilowatt-hour. The IEA's Global EV Outlook 2026 confirms that while LFP has made inroads in China, high-nickel NCM remains the dominant chemistry in North America and Europe — regions that collectively account for the majority of global EV revenue. High-nickel NCA and NCM cathodes captured 50.9% of the nickel-based EV battery market in 2026, and continuous design cycles are pushing nickel content beyond 90% in some cells.

But the real pivot point for sulfate is supply, not demand. Indonesia's 2026 nickel ore quota (RKAB) was slashed to 250–270 million wet metric tonnes from 379 million tonnes actually extracted in 2025 — a cut of roughly 30%. PT Weda Bay Nickel, Indonesia's largest nickel miner, saw its quota reduced from 42 million tonnes to just 12 million tonnes. By mid-May, WBN's quota was nearly exhausted, forcing it into care and maintenance and leaving HPAL projects in the IWIP park scrambling for ore from other islands at higher logistics costs and inconsistent quality.

The sulfur factor compounds the squeeze. In late February 2026, Strait of Hormuz shipping disruptions — triggered by escalating Middle East tensions — directly impacted sulfuric acid supplies for Indonesia's HPAL operations. HPAL plants typically hold only 1–2 months of sulfur inventory, and sulfur represents roughly 50% of operating expenses at these facilities. The Indonesia Nickel Smelters Association (FINI) confirmed that no HPAL refineries have been forced to fully halt, but several sites are drawing down inventories to critical levels. Mysteel estimates that full-year 2026 Indonesian MHP production — the key intermediate feedstock for Chinese nickel sulfate refineries — could be revised down from an initial 550,000 tonnes of nickel content to a range of 300,000–350,000 tonnes, a reduction of 200,000 tonnes or more.

That 200,000-tonne swing in MHP supply matters because China's nickel sulfate refineries are the primary offtakers of Indonesian MHP. If MHP arrivals contract, Chinese sulfate producers either bid up Class 1 nickel feed (re-importing metal at a premium) or cut output. ING expects LME nickel to average $15,250/tonne in 2026, but that forecast predates the scale of the Indonesian quota and sulfur disruptions now visible. Some analysts now see the nickel market flipping from surplus to deficit in the second half of the year.

Meanwhile, Fastmarkets in May 2026 proposed reducing the publication frequency of its nickel sulfate CIF Japan and Korea assessments — a move that signals declining spot liquidity as long-term offtake agreements now dominate procurement strategy among Japanese and Korean cathode makers. When the biggest buyers are all on contract, the spot market becomes thinner, more volatile, and less representative of the true marginal cost of supply.

Vale's planned nickel sulfate refinery in Becancour, Quebec — targeting first deliveries to General Motors in H2 2026 — represents the kind of Western processing capacity that could eventually ease the bottleneck. But one refinery does not a market make. CATL's $5.9 billion integrated nickel project in Indonesia is also targeting start-up by end of 2026, but new HPAL capacity takes years to ramp to nameplate, and Indonesia has imposed a moratorium on new HPAL project approvals, creating a structural ceiling on future sulfate capacity growth.

For procurement teams sourcing battery-grade nickel sulfate, the key takeaway is that the feedstock market is moving from one defined by Indonesian abundance to one defined by Indonesian constraint. Ore quotas are tighter. Sulfur is more expensive and less reliable. Tailings-related operational risks are material, as the February 2026 IMIP landslide demonstrated. And the market's price-discovery mechanisms are shrinking as spot volumes dwindle. The feedstock the market forgot to worry about is quietly becoming the one it should be watching most closely.