An Introduction to Nickel Markets
A complete, beginner-friendly map of how nickel is mined, processed, traded, financed, and priced - and who does each part
This is meant to stand on its own as a first introduction to the nickel market as a whole. It assumes no prior knowledge and builds in order: first the physical metal and the chain of businesses that handle it, then the units, product classes and contracts the market is quoted in, then the financial market layered on top, then the participants and the desks that operate it, and finally the forces cycles, geopolitics, history - that move the whole thing. Read it top to bottom the first time; later sections lean on earlier vocabulary. It is a structural explainer, not a price call.
The whole market in one paragraph. Nickel is two markets wearing one name. Its largest use, by far, is making stainless steel rust-resistant (around two-thirds of demand), and its fastest-growing use is the cathode of electric-vehicle batteries. It comes from two very different ores - sulphide and laterite - that are processed by different routes into two different product grades: Class 1, the pure metal that the London exchange trades, and Class 2, the lower-grade nickel pig iron and ferronickel that goes into stainless steel. Those two grades were long separate markets, but since about 2021 new conversion technology has joined them. One country now dominates the whole chain: Indonesia, which produces roughly two-thirds of the world's mined nickel and about half of the refined metal after banning raw-ore exports to force processing onshore, largely with Chinese capital. That supply surge has pushed the market into surplus every year since 2022 and crushed the price, closing high-cost mines elsewhere. And the contract that prices it all, the LME's, references only the small Class 1 pool - a disconnect that helped produce the most violent episode in the metal's history, the March 2022 short squeeze.
ER O
Sulphide ore
S S EC ORP S T C UD O R P
recycled nickel (largely stainless scrap)
~35% of resources (Russia, Canada)
Smelt to matte, then refine
Laterite ore
~54% of resources (Indonesia, Philippines, New Caledonia)
RKEF smelting
HPAL leaching
energy-intensive
acid leach of laterite
via MHP
Class 1 nickel (99.8%+) cathode, briquette, powder the LME-deliverable grade
Class 2 nickel
Nickel sulphate
NPI & ferronickel (lower grade)
battery-grade salt
NPI-to-matte conversion links the two segments (since 2021)
ESU DNE
Alloys & plating
superalloys, electroplating
Stainless steel (~65-70%)
the dominant use; fed by both classes
The nickel value chain. Two ore types feed two product classes: Class 1 (LME-deliverable, for alloys, plating and, via sulphate, batteries) and Class 2 (NPI and ferronickel, for stainless steel). Matte conversion now links them.
Batteries
EV cathodes (NMC, NCA)
What nickel is and why its market exists
Nickel (chemical symbol Ni, atomic number 28) is a hard, silvery metal that resists corrosion and heat, holds up at high temperatures, and alloys readily with iron, chromium and other metals. It melts at about 1,455 degrees C, far higher than zinc or aluminium. Its market exists for two main reasons. The first and largest is stainless steel. Adding nickel to a chromium-steel alloy produces austenitic stainless steel - the familiar, highly corrosion-resistant, easily formed grades (the 300 series, of which the common 304 grade is around 8 to 10% nickel). Stainless steel takes roughly two-thirds of all nickel and is the demand engine of the market. The second, newer and faster-growing reason is batteries: nickel is a key ingredient in the high-energy cathodes of many electric-vehicle batteries (the NMC and NCA chemistries), where more nickel means more energy density. The remainder goes into high-performance alloys and superalloys (jet engines, gas turbines, where nickel-base alloys like the Inconel family are essential), electroplating, and chemicals. That split shapes everything. For most of its modern history nickel was essentially a bet on stainless steel and the industrial cycle. Over the last decade the battery story was bolted on, turning nickel into both an industrial metal and an energy-transition metal - which is why its demand is now pulled by two very different forces (Chinese construction and appliances on the stainless side; EV sales and battery chemistry on the other), and why the metal sits on the critical-minerals lists of the US, Australia and others.
The nickel value chain (the physical spine)
Two ores. Nickel comes from two geologically different sources. Sulphide ores (think Norilsk in Russia, Sudbury in Canada, the historic Australian deposits) are about a third of resources; they are richer and easier to process but largely already discovered. Laterite ores (Indonesia, the Philippines, New Caledonia) are about half of resources; they are near-surface and abundant but harder to treat. This split is the root of nearly everything distinctive about nickel. Two processing routes, three products. Sulphide ore is smelted into a matte and then refined electrolytically or by the carbonyl process - into Class 1 nickel, the pure metal (99.8% and above) that takes the form of cathode, briquettes, powder and rounds. Laterite ore takes one of two paths. The pyrometallurgical route (the rotary-kiln electric furnace, or RKEF) smelts it into nickel pig iron (NPI) or ferronickel - this is Class 2 nickel, lower-grade material destined for stainless steel. The hydrometallurgical route (high-pressure acid leach, or HPAL) dissolves it into an intermediate (mixed hydroxide precipitate, MHP) that is refined into battery-grade nickel sulphate or into Class 1 metal. The two-grade market - and its bridge. For decades Class 1 and Class 2 were effectively separate markets with their own supply, demand and prices: Class 1 for plating, alloys and (later) batteries; Class 2 for stainless. The crucial recent change is that, since about 2021, producers (Tsingshan first) industrialised the conversion of NPI into high-grade nickel matte, which can then be refined into Class 1 metal or battery-grade sulphate. Together with the HPAL-to-sulphate route, this connected the two halves of the market: low-grade Indonesian nickel can now reach the battery supply chain. It is the single most important structural development in nickel this decade. End use. Class 2 (NPI, ferronickel) and some Class 1 go into stainless steel; nickel sulphate goes into battery cathodes; the rest of Class 1 goes into superalloys, plating and chemicals.
Recycling. Nickel is one of the most recycled industrial metals, and almost all of it returns embedded in stainless-steel scrap that is melted straight back into new stainless. In the United States, nickel recovered from scrap was equal to about 60% of apparent consumption in 2025; globally a large share of supply comes from scrap, mostly via stainless. Recycling is therefore a real, if often invisible, part of the balance - it is counted inside stainless-steel flows rather than as a separate refined-nickel stream.
How nickel is measured and quoted (classes, units, contracts)
The class distinction. The first thing to understand about nickel pricing is the Class 1 / Class 2 split. Class 1 (high-grade, 99.8% and above) is the LME-deliverable metal; Class 2 (NPI and ferronickel) is not deliverable and trades on its own physical terms, usually priced at a discount to the LME and often referenced to a percentage of the nickel price. Battery-grade nickel sulphate trades on yet another basis, at a premium or discount to LME metal depending on battery demand. Units and grades. Nickel is measured by the tonne of contained nickel and quoted in US dollars per tonne (the North American market also uses dollars per pound). Battery makers demand very high purity (typically above 99.95%) to keep impurities like copper and cobalt out of the cathode. Contracts. The London Metal Exchange nickel contract (code NI), introduced in 1979, is for 6 tonnes of primary nickel of 99.80% minimum purity, priced in dollars per tonne and physically deliverable from LME warehouses. The Shanghai Futures Exchange lists a 1-tonne nickel cathode contract in renminbi. A persistent issue, central to the 2022 crisis described later, is that the exchange contract references only the Class 1 pool, even though most of the market's growth has been in Class 2 and intermediates that the contract does not cover.
The financial market (layered on top of the physical)
The exchanges. The LME is the global benchmark, in dollars per tonne and backed by physical warehouses; the Shanghai Futures Exchange is the Chinese reference in renminbi. The LME price is what most physical contracts, including Class 2 and sulphate, are referenced against. The curve, warehouses and warrants. As with other base metals, contango (later months above near) is the normal state and backwardation signals near-term tightness; LME-registered metal sits on warrants in approved warehouses, with on-warrant stock available and cancelled warrants earmarked for withdrawal. Two features stand out for nickel. First, the deliverable Class 1 pool is small relative to the whole market, so LME stocks can be drawn down or built up quickly. Second, the composition of those stocks has shifted dramatically: as Chinese and Indonesian producers ramped up Class 1 output, Chinese-origin metal went from under half to more than two-thirds of LME stocks during 2025, while Russian and Australian shares shrank. Volatility. Nickel is the most volatile of the major LME metals - over the past two decades its daily price swings have been far larger than aluminium's or copper's - which both reflects and amplifies the structural tensions in the market.
Who's in the market (a participant taxonomy)
Miners and integrated producers. The roster splits by grade. The largest producer by sheer volume is China's Tsingshan, whose Indonesian operations pour out NPI and matte. Among the leading producers of high-grade Class 1 metal are Russia's Norilsk Nickel (from sulphide ore in Siberia and on the Kola Peninsula), one of the world's biggest nickel and palladium producers, and China's
Jinchuan, the country's largest nickel producer. Other Class 1 producers include Glencore, Vale (Canada, Brazil and Indonesia), Sumitomo Metal Mining and Huayou. Diversified miners Vale, Glencore, BHP, Anglo American and Eramet have large nickel businesses, though several have been retreating: BHP placed its Australian Nickel West operations on care and maintenance in 2024, Glencore moved to exit its Koniambo plant in New Caledonia, and Anglo American sold its Brazilian nickel business. Processors and the Indonesian complex. A defining feature is the cluster of Chinese-backed processing parks in Indonesia (Morowali, Weda Bay and others) that turn local laterite into NPI, matte, MHP and sulphate. This is where most new supply has come from. Consumers. Stainless-steel mills (China and Indonesia above all) are the dominant buyers; batteryprecursor and cathode makers (mostly in China, Korea and Japan) buy nickel sulphate; aerospace and specialty-alloy makers buy high-purity Class 1. Traders and data. Trading houses (Glencore, Trafigura and others) move metal, intermediates and ore and finance producers. The standard data sources are the International Nickel Study Group (INSG) for supply, demand and balances, the US Geological Survey (USGS) for mine production and reserves, and worldstainless for stainless-steel output; CRU, Wood Mackenzie, Benchmark Mineral Intelligence and Fastmarkets provide cost curves, intermediate prices and battery-supply analysis.
Trading desks and hedge funds (the operating seats)
Bank base-metals desks. These quote LME nickel and its options, structure hedges and financing for producers and consumers, and run index and financing business. Nickel is a smaller and more volatile contract than copper or aluminium, and its liquidity was badly damaged by the 2022 crisis before recovering; by 2025, average daily LME nickel volumes had returned to and surpassed pre2022 levels. Merchant and trading-house desks. These trade the physical book across grades and intermediates (ore, NPI, matte, MHP, sulphate, Class 1), arbitrage location and the LME-versus-Shanghai gap, and increasingly trade the basis between Class 1 and Class 2 or between metal and sulphate. That basis is where nickel's distinctive risk lives. Funds. Macro and systematic funds trade nickel within the base-metals complex, though its volatility makes it a smaller, more tactical position for many. The 2022 episode itself was, at root, a clash between a huge industrial short (Tsingshan) and opportunistic financial longs. The defining hazard - basis risk. Nickel's signature trade and signature danger is cross-grade hedging: a producer of Class 2 or matte that hedges by selling the Class 1 LME contract is exposed if the two prices diverge. When that basis blew out in March 2022, the hedge became the catastrophe (Section 11). The lesson sits at the centre of how the market is now traded and risk-managed.
How everything interacts (the causal chain)
Walk the chain. Ore is mined - sulphide or laterite - and processed by the matching route into Class 1 metal, Class 2 NPI or ferronickel, or a battery intermediate; Class 2 and some Class 1 feed stainlesssteel mills, intermediates and sulphate feed battery makers, and high-purity Class 1 feeds alloys and plating; finished stainless and batteries go into appliances, construction, vehicles and grids; and end-of-life stainless returns as scrap to be remelted.
Two demand engines, two supply grades. The market's behaviour comes from the interaction of two demand pillars (stainless and batteries) with two supply grades (Class 2 and Class 1), now linked by conversion. A glut of one grade no longer stays contained: surplus Indonesian Class 2, converted to matte, can spill into the Class 1 and battery markets, which is precisely what has driven the metal into broad surplus and dragged the LME price down. The Indonesia pivot. Because Indonesia now makes around two-thirds of mined nickel and about half of refined nickel, Indonesian policy - export rules, mining-permit (RKAB) quotas, royalty rates, power sources - and the pace of its Chinese-backed projects move the entire global market more than any other single factor.
Reading a balance correctly
The headline numbers. The INSG reports world primary (refined) nickel production, usage and the resulting surplus or deficit. Production is running around 3.5 to 3.8 million tonnes a year and usage around 3.3 to 3.6 million tonnes, with stainless steel taking just under 70% of primary nickel and batteries most of the rest of the growth. A market in chronic surplus. The defining fact of the current cycle is that the primary nickel market has been in surplus every year since 2022. The INSG has reported successive surpluses (broadly in the 100,000 to 250,000 tonne range, depending on the year and the revision) and forecasts a further, larger surplus for 2026, on the order of 260,000 tonnes. The surplus is concentrated in Class 1 metal, much of it Chinese-origin material piling up in LME and other warehouses. Read the balance by grade, not just in total: the surplus is a Class 1 and intermediate story driven by Indonesian expansion, while specific high-cost mines elsewhere have been shutting. What to distrust. Because so much nickel now moves as intermediates inside integrated ChineseIndonesian supply chains, and because Class 2 and sulphate are priced off-exchange, visible LME stocks and the flat price tell you less about true tightness than they used to. Watch grade-level balances, intermediate (MHP, matte) prices, and Indonesian output, not just the headline number.
Prices, cycles, and the long arc
The cycle. Nickel is highly cyclical and, historically, highly volatile. Stainless demand ties it to the industrial cycle; the supply side is prone to lumpy shifts and, in this era, to one country's policy. The classic pattern - high prices spur new supply that later gluts the market - has played out at extreme scale through Indonesia. Reference points. For most of the years before 2022, nickel traded in a relatively contained range, rarely much above 20,000 dollars per tonne. Then, in the March 2022 short squeeze, the price briefly hit an all-time intraday high of about 101,365 dollars per tonne - more than double the prior day's close - before the exchange intervened (Section 11). Since then the direction has been relentlessly down under the weight of Indonesian oversupply: the LME nickel cash price averaged about 21,500 dollars in 2023, about 16,800 in 2024 (down roughly a fifth), and around 15,000 in 2025, falling below 15,000 - its lowest since 2020 - around the turn of 2024 to 2025. At those levels roughly half of all nickel producers were estimated to be loss-making, which is what forces the high-cost closures that eventually rebalance the market. The long arc. Nickel demand has grown with global stainless-steel use and, more recently, with batteries; both drivers point up over the long run, even though the battery contribution has lately grown more slowly than once expected (because cheaper, nickel-free lithium-iron-phosphate
batteries took share and EV growth cooled). The structural question for the next decade is whether anyone can profitably mine and process nickel outside the low-cost Indonesian complex - and what that concentration means for security of supply.
Geopolitics and strategic dimensions
The Indonesia story. Indonesia transformed the market by banning exports of raw nickel ore (first in 2014, then comprehensively from 2020) to force processing onshore. The policy drew enormous Chinese investment into RKEF and HPAL plants, and Indonesia went from a mid-sized producer to the dominant force - roughly two-thirds of mined nickel, about half of refined nickel, and the largest reserves (about 62 million of some 140 million tonnes worldwide). It is the textbook case of resource nationalism reshaping a global market. Indonesia has since tightened further, slowing mining permits and raising royalties, and the Philippines has debated its own ore-export ban. Russia and Class 1. Russia's Norilsk Nickel is a major source of high-grade Class 1 metal (Russia supplies on the order of a tenth of global nickel and a larger share of battery-grade), so the war in Ukraine and subsequent sanctions mattered: fears over Russian supply helped trigger the 2022 squeeze, and the LME later banned new Russian-origin metal while the US and UK restricted Russian metal imports. Batteries, critical minerals and a Western retreat. Nickel is on the critical-minerals lists of the US, Australia and the EU because of its role in batteries and alloys. Yet the flood of cheap Indonesian supply has done the opposite of what high prices in 2021-22 promised: it has made Western nickel mining largely unprofitable, pushing Australian and other operations into closure even as governments label the metal strategic. Australia added nickel to its critical-minerals list and offered support as its industry contracted. Energy and carbon. Processing route determines carbon footprint. RKEF smelting of laterite is highly energy-intensive and, in Indonesia, largely coal-powered, giving Indonesian Class 2 nickel a heavy carbon footprint - an emerging issue as carbon border charges and battery-supply-chain rules put a premium on cleaner units.
A short history and its cautionary tales
The long backdrop. Nickel built its market on stainless steel through the twentieth century, with sulphide deposits at Sudbury and Norilsk as the classic sources and a handful of Western majors dominating supply. The 2007 boom. A stainless-driven supply squeeze drove nickel to a then-record near 50,000 dollars per tonne, before collapsing in the financial crisis - an early lesson in the metal's volatility. The Indonesia turn (2014 onward). The ore-export bans and the Chinese-funded build-out of Indonesian processing rewired global supply over a decade, and ultimately produced the surplus and price collapse of 2023 to 2025. The March 2022 short squeeze. The defining market event. Tsingshan, the world's largest nickel and stainless producer, held a very large short position in LME nickel (across the exchange and private over-the-counter trades with several banks) - effectively hedging its low-grade output with the high-grade contract. When Russia's invasion of Ukraine sent prices up and stocks were already low, the short turned into a violent squeeze: on 8 March 2022 the price spiked around 250% to an intraday record near 101,365 dollars per tonne, more than double the previous close. The LME suspended nickel trading and took the extraordinary step of cancelling roughly 9,000 trades worth
about 4 billion dollars, resetting the price to around 50,000 dollars to avert a cascade of broker defaults. Trading reopened days later under price limits. The cancellation rescued Tsingshan (which faced losses estimated in the billions) but enraged the financial longs whose profits were voided, triggering lawsuits and lasting damage to the contract's credibility. The deep cause was structural: the LME contract references only the small Class 1 pool, while the market's growth and Tsingshan's production were Class 2 - a basis mismatch that turned a hedge into a near-collapse. It is the central cautionary tale of the market: in nickel, the grade you hedge with may not be the grade you produce. 2023 to 2025. Indonesian supply overwhelmed demand, the price fell to multi-year lows, and highcost producers from Australia to New Caledonia shut down - the slow, painful rebalancing that always follows a supply glut.
What to watch: a starter dashboard
Indonesian policy and output. Export rules, mining-permit (RKAB) quotas, royalty rates, and the pace of new RKEF and HPAL projects - the single biggest driver of global supply. The INSG balance, by grade. Direction and source of the surplus or deficit, and especially whether it sits in Class 1, Class 2 or intermediates. Intermediate and sulphate prices. MHP and matte prices, and the nickel-sulphate premium or discount to LME metal, reveal battery-side tightness that the flat price hides. The Class 1 / Class 2 basis. The spread between exchange metal and NPI or ferronickel - the heart of nickel's distinctive risk. Battery chemistry and EV demand. The share of nickel-rich chemistries versus nickel-free LFP, and the pace of EV sales. Stainless-steel output. Chinese and Indonesian stainless production, still the dominant demand driver. LME stocks and their origin. The level and the rising Chinese-origin share of warehouse metal. High-cost closures and restarts. Australian, New Caledonian and Canadian operations - the marginal supply that adjusts to price.
How to think about the outlook and the major players
The frame. Nickel is two markets - stainless and batteries - fed by two grades from two ores, now joined by conversion, and overwhelmingly shaped by one country. Demand has two engines pulling in different rhythms; supply is dominated by low-cost Indonesian (largely Chinese-backed) capacity that has put the market into chronic surplus and crushed the price. The supply side. The decisive variable is Indonesia: how fast it expands, and how it regulates permits, royalties and exports. Outside Indonesia, high-cost mines have been closing, and a swing back toward balance depends on either demand catching up or Indonesian growth slowing. New supply elsewhere (and any Western or allied push for non-Chinese, lower-carbon nickel for batteries) is a slow, policy-driven counterweight. The demand side. Stainless steel remains the anchor (just under 70% of demand, led by China and Indonesia); batteries are the swing growth story, now tempered by LFP competition but expected to resume growth over the longer run.
The players to know. Producers: Tsingshan (largest by total volume, via Indonesia), Norilsk Nickel and Jinchuan (leading Class 1 producers), Vale, Glencore, Eramet, Sumitomo; BHP and Anglo American have stepped back. Data: the INSG and the USGS, with worldstainless for the stainless side. Bottom line. To read nickel, separate the two markets and the two grades, then watch Indonesia. Track the Class 1 / Class 2 basis and intermediate prices for where the real tightness is, follow stainless and battery demand for the two engines, and remember the central lesson of 2022 - that hedging one grade of nickel with another can go badly wrong.
Glossary (quick reference) Class 1 nickel - high-grade refined nickel, 99.8% and above (cathode, briquettes, powder); the LMEdeliverable form, used in plating, alloys and (via sulphate) batteries. Class 2 nickel - lower-grade nickel (nickel pig iron and ferronickel), not LME-deliverable; used mainly in stainless steel. Ferronickel - an iron-nickel alloy smelted from laterite ore, fed directly into stainless steel. HPAL - high-pressure acid leach; a hydrometallurgical route that dissolves laterite ore into an intermediate (MHP) for battery-grade nickel or Class 1 metal. INSG - International Nickel Study Group; the standard source for nickel supply, demand and balances. Laterite ore - near-surface, weathered nickel ore (Indonesia, the Philippines, New Caledonia); about half of world resources. LME nickel (code NI) - the London contract: 6 tonnes of 99.8%-minimum primary nickel, priced in dollars per tonne; the global benchmark. Matte - an intermediate nickel-sulphur product from smelting (or from NPI conversion) that is refined into Class 1 metal or sulphate. MHP - mixed hydroxide precipitate; the HPAL intermediate used to make battery-grade nickel sulphate. NPI (nickel pig iron) - low-grade nickel-iron product from RKEF smelting of laterite; the main feed for stainless steel. Nickel sulphate - the battery-grade nickel salt used in lithium-ion cathode precursors (NMC, NCA). RKEF - rotary-kiln electric furnace; the energy-intensive pyrometallurgical route that turns laterite into NPI or ferronickel. Stainless steel - the largest use of nickel; austenitic (300-series) grades rely on nickel for corrosion resistance and formability. Sulphide ore - richer, deeper nickel ore (Russia, Canada, Australia); about a third of resources, the traditional Class 1 source. Structural primer. The mechanics - the two ores and routes, the Class 1 / Class 2 split, the LME contract and the desks - are stable; the specific figures and the current outlook move and should be checked against live sources before use. Headline figures here reflect the most recent full-year data available as of mid-2026 (INSG and USGS), with reference years stated where they matter.