NICKEL SUPPLY AND DEMAND: KEY MARKET DRIVERS
Understand the key demand and supply factors fuelling the nickel market.
Nickel Demand in Electric Vehicles
The rise of electric vehicles (EVs) has significantly impacted global nickel demand, establishing EV battery manufacturing as a critical market driver. Nickel is a key component in lithium-ion batteries, particularly in chemistries like Nickel-Cobalt-Manganese (NCM) and Nickel-Cobalt-Aluminium (NCA), both of which require high-purity Class 1 nickel to enhance energy density and performance.
As nations commit to decarbonisation and the automotive industry shifts from internal combustion engines to EVs, demand for nickel-rich cathodes is increasing rapidly. Manufacturers are prioritising battery types with higher nickel content to achieve longer range and faster charging, reducing reliance on more expensive and geopolitically sensitive alternatives like cobalt.
According to the International Energy Agency (IEA), EV sales more than quadrupled from 2019 to 2023. This growth has placed structural pressure on nickel markets, with battery-grade nickel demand forecast to surpass supply in the near future. Automakers such as Tesla and Volkswagen have secured long-term supply agreements with miners to guarantee access to battery-grade nickel, highlighting the metal's strategic importance in EV supply chains.
Furthermore, several governments have enacted industrial policies encouraging domestic EV production and battery manufacturing capabilities, further cementing nickel’s role in the energy transition. For example, the U.S. Inflation Reduction Act provides incentives for sourcing battery materials domestically or from free-trade partners, influencing global nickel trade flows.
However, there are risks. The nickel required for EVs must meet stringent purity standards, and only a limited number of producers globally can supply this grade. Traditional mining operations often need additional refining capacity to meet demand, posing both environmental and financial challenges. Moreover, evolving battery chemistries—such as lithium iron phosphate (LFP), which contains no nickel—may partially offset future demand if adopted more widely outside China.
In summary, the accelerating adoption of EVs worldwide is reshaping the demand structure of the nickel market. While growth prospects remain strong, future dynamics will depend on technological innovation, regulatory environments, and the pace of EV penetration globally.
Nickel in Stainless Steel Production
Long before electric vehicles boosted its profile, nickel’s primary market was stainless steel manufacturing. This segment continues to represent the largest share of global nickel consumption, accounting for approximately 65–70% of total usage. Nickel’s corrosion resistance and strength-enhancing properties make it a critical alloying element in austenitic stainless steel, widely used across construction, transportation, and manufacturing industries.
The demand for stainless steel, and by extension nickel, is closely tied to economic cycles. Construction booms, infrastructure spending, and industrial activity particularly in emerging markets such as India, Indonesia, and China, significantly influence consumption dynamics. As China's economy has grown, so too has its steel production, making it the world’s largest consumer of nickel.
China’s stainless steel production—especially the 300-series grade, which contains between 8% to 10.5% nickel—has sustained nickel demand growth for over a decade. More recently, Indonesia has also emerged as a key player, with major investments in integrated nickel-to-stainless steel production hubs. These developments not only shift global production centres but also create internalised demand loops that absorb domestic nickel output.
However, stainless steel is mostly compatible with lower-grade ferronickel and nickel pig iron (NPI), which can be produced at a lower cost compared to Class 1 battery-grade nickel. This has given rise to complex market bifurcations, with two main price classes: one for refined battery metal, and another for the lower-grade steel segment.
Technological advancements have also enhanced stainless steel's recyclability, introducing secondary nickel into the market. Recycled stainless steel now represents a non-trivial portion of the supply chain, helping to marginally offset the demand for mined nickel. Yet given its limitations in purity, secondary nickel is less relevant for battery applications.
Despite EVs commanding attention, the stainless steel sector remains a vital and stable consumer of nickel. Its size and historical consistency provide an anchor to the market, even as new technologies introduce additional volatility. Going forward, infrastructure megaprojects and clean energy transitions—such as solar and wind installations—are also expected to sustain strong demand for nickel-bearing stainless steel components.
Concentration and Risks in Nickel Supply
Nickel's growing strategic importance has placed a spotlight on its supply chain, which faces several challenges including geographic concentration, market volatility, and environmental constraints. The global nickel supply is both limited and highly concentrated, posing risks to energy transition initiatives reliant on secure material inputs.
Indonesia and the Philippines dominate global nickel mining. As of 2023, Indonesia accounts for more than 40% of global nickel supply, followed by the Philippines with approximately 10%. This concentration raises concerns about supply chain resilience, especially amid geopolitical uncertainties, export bans, and regulatory shifts.
Indonesia’s decision in 2020 to ban exports of unprocessed nickel ore disrupted global markets. While the intention was to encourage local smelter development and value-add industrialisation, it also underscored the fragility of producer-consumer dependencies. Since then, Indonesia has built out refining capacity and climbed the value chain, emerging as not only a key ore supplier but also a midstream processor and potential battery hub.
Beyond ore production, processing capacity also remains scarce. More than half of the global supply is of lower nickel grades, such as ferronickel or NPI, which are unsuitable for battery use without additional refining. Investments into new refining technologies—like high-pressure acid leach (HPAL)—promise to advance the production of battery-grade nickel but come with significant cost and environmental considerations.
Another supply-side challenge is ESG scrutiny. Nickel mining, particularly in tropical developing countries, can lead to deforestation, water contamination, and community displacement if not well-regulated. Stakeholders are increasingly demanding traceability and environmental accountability, pressuring producers to adopt more responsible practices while potentially reducing the pace of project approvals.
On the financial side, the nickel market has seen price spikes and dislocations—most famously in March 2022, when a short squeeze on the London Metal Exchange (LME) caused prices to double within hours. Such episodes highlight the risks of concentration not only in physical supply but also financial market structures underpinning nickel trade.
Looking ahead, to ensure resilient supplies, Western countries and automakers are diversifying sources, funding exploration projects in Canada, Australia, and Africa. Strategic partnerships, stockpiling policies, and transparent pricing mechanisms are emerging as tools to mitigate concentration risks. Supply chain localisation initiatives are also being pursued to support domestic battery manufacturing needs, especially in the U.S. and EU.
Nickel's critical role in the clean energy future makes addressing supply risks an imperative for governments and industries alike. Ensuring a balanced, diversified, and sustainable supply chain will determine the pace at which the energy transition can proceed.
