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# Nickel Demand Growth and the Supply Challenge
- URL: https://blog.financely.io/nickel-demand-growth-and-the-supply-challenge/
- Published: 2026-09-02T12:21:47.000Z
- Updated: 2026-09-02T12:21:47.000Z
- Description: Nickel demand is rising across stainless steel, batteries and industry, but Indonesian supply growth continues to reshape prices, margins and project economics.
- Author: Financely Debt Advisors
- Tags: Nickel, Battery Metals

Nickel | Critical Minerals | Battery Metals 

## Nickel Demand Is Growing. Supply Is Growing Faster.

**Global nickel consumption is still expanding at a strong rate. The International Nickel Study Group expects primary nickel usage to increase from 3.60 million tonnes in 2025 to 3.82 million tonnes in 2026.**

That represents annual demand growth of roughly 6.2% in a market already consuming several million tonnes of nickel each year.

The longer-term demand case remains substantial. The International Energy Agency expects nickel consumption to rise sharply through 2040 as electric vehicles, battery storage and other energy technologies absorb larger volumes alongside traditional industrial demand.

Yet nickel has become one of the clearest examples of why strong commodity demand alone fails to guarantee high commodity prices. Indonesia has expanded mine and processing capacity so rapidly that supply continues to outrun consumption.

For mining investors, lenders and project developers, the question has shifted. The market needs more nickel over time. The harder question is which nickel operations can remain economically competitive while the global cost curve continues to be reshaped.

### Table of Contents

1. [Nickel Demand Is Still Growing](#demand)
2. [Stainless Steel Still Dominates](#stainless)
3. [Battery Demand Changes the Mix](#batteries)
4. [The Long-Term Demand Outlook](#longterm)
5. [Supply Is Expanding Even Faster](#supply)
6. [Indonesia Changed the Market](#indonesia)
7. [Not All Nickel Is the Same](#products)
8. [What This Means for Mine Economics](#economics)
9. [What Investors Should Watch](#investors)
10. [Frequently Asked Questions](#faq)

## Nickel Demand Is Still Growing

The latest forecast from the [International Nickel Study Group](https://insg.org/index.php/about-nickel/the-market-2025-12/?ref=blog.financely.io) puts global primary nickel usage at approximately 3.60 million tonnes in 2025 and 3.82 million tonnes in 2026.

An additional 220,000 tonnes of annual demand in a single year is substantial. It means the market has to absorb new nickel equivalent to several large mining and processing operations merely to satisfy annual consumption growth.

The increase also continues a much longer expansion. INSG data show global nickel consumption rising from approximately 1.1 million tonnes in 2000 to well above three million tonnes today. China and the wider Asian industrial economy accounted for much of that growth, first through stainless steel and increasingly through battery supply chains.

Nickel therefore has both an established industrial demand base and a newer source of demand tied to electrification.

The International Energy Agency's 2026 Critical Minerals Outlook states that **“demand growth for nickel, graphite and rare earths also continues to be strong.”**

## Stainless Steel Still Accounts for Most Nickel Consumption

The battery narrative can obscure what actually consumes most of the world's nickel.

Stainless steel remains the largest first-use market by a wide margin. INSG estimates that the sector currently accounts for just under 70% of primary nickel consumption.

The [Nickel Institute](https://nickelinstitute.org/en/nickel-applications?ref=blog.financely.io), using 2025 industry data, puts stainless steel at approximately 67% of first use, followed by batteries at around 15%, nickel-based alloys at 6%, plating at 5% and alloy steels at 3%.

| Nickel First Use         | Approximate Share |
| ------------------------ | ----------------- |
| Stainless steel          | 67%               |
| Batteries                | 15%               |
| Nickel-based alloys      | 6%                |
| Plating                  | 5%                |
| Alloy steels             | 3%                |
| Foundries and other uses | 4%                |

This matters because nickel demand cannot be modeled solely from electric-vehicle penetration.

Stainless steel production responds to construction, industrial investment, manufacturing, infrastructure and consumer demand across the global economy. Nickel also goes into corrosion-resistant alloys used in chemical processing, energy infrastructure, aerospace, defence and high-temperature applications.

The U.S. Geological Survey notes that stainless and alloy steels and nickel-containing alloys typically account for more than 85% of U.S. nickel consumption.

Nickel remains a major industrial metal even before battery demand is considered.

## Battery Demand Is Changing the Composition of the Market

Batteries have nevertheless become a material new source of nickel consumption.

High-nickel cathode chemistries can use nickel to increase energy density, making the metal particularly relevant for electric vehicles where battery weight, range and packaging efficiency matter.

Nickel is used in chemistries including nickel-cobalt-manganese and nickel-cobalt-aluminium cathodes. Over time, manufacturers reduced cobalt intensity in several battery formulations while increasing nickel content.

That trend gave nickel a prominent position in early forecasts for electric-vehicle material demand.

The market has since become more complicated.

Lithium iron phosphate batteries contain no nickel. Rapid adoption of LFP, particularly in China and lower-cost electric vehicles, has reduced the amount of nickel required per unit of global EV battery capacity relative to some earlier projections.

INSG estimates that nickel use in EV batteries declined slightly in 2025, reflecting changes in subsidies, stronger competition from non-nickel chemistries and a change in the mix between battery-electric and plug-in hybrid vehicles.

The organization still expects battery-sector nickel demand to resume growth.

## The IEA Still Expects Much Higher Nickel Demand by 2040

The latest [IEA Global Critical Minerals Outlook 2026](https://www.iea.org/reports/global-critical-minerals-outlook-2026/outlook?ref=blog.financely.io) expects nickel demand to grow strongly across its energy scenarios.

Depending on the scenario, the IEA projects demand growth for nickel, graphite and rare earths of approximately 50% to 90% through 2040.

Energy technologies become an increasingly important source of incremental demand through electric vehicles, energy storage, renewable infrastructure and electricity networks.

The IEA's detailed 2025 nickel analysis provides a useful indication of the scale involved. Under its Stated Policies Scenario, total nickel demand increases from about 3.37 million tonnes in 2024 to 4.39 million tonnes in 2030 and 5.69 million tonnes by 2040.

Within that projection, clean-energy demand rises much faster than traditional uses. The IEA estimated approximately 562,000 tonnes of clean-technology nickel consumption in 2024, rising to around 1.35 million tonnes in 2030 and more than 2.38 million tonnes in 2040.

Traditional demand still grows over the same period.

This is important. The long-term nickel thesis depends less on batteries replacing stainless steel and more on battery demand being added to a large existing industrial market.

## The Problem for Nickel Prices Is Supply

The current nickel market is already well supplied.

INSG estimates primary nickel production of approximately 3.81 million tonnes against consumption of 3.60 million tonnes in 2025\. That leaves a projected surplus of roughly 209,000 tonnes.

For 2026, supply is expected to rise further to approximately 4.08 million tonnes while usage reaches 3.82 million tonnes.

The resulting projected surplus increases to approximately 261,000 tonnes.

| Global Primary Nickel | 2025    | 2026 Forecast |
| --------------------- | ------- | ------------- |
| Production            | 3.81 Mt | 4.08 Mt       |
| Usage                 | 3.60 Mt | 3.82 Mt       |
| Market balance        | +209 kt | +261 kt       |

Demand is growing quickly.

Supply is currently growing even more quickly.

That distinction explains much of the pressure the nickel industry has experienced despite an otherwise credible long-term demand outlook.

## Indonesia Has Rewritten the Nickel Cost Curve

No country has influenced the modern nickel market more than Indonesia.

INSG expects Indonesia to account for approximately 66% of global mine output in 2025 and around 68% in 2026.

Mine production is only part of the story.

Chinese-backed investment has built an extensive Indonesian processing industry capable of producing nickel pig iron, ferronickel, matte, mixed hydroxide precipitate, nickel sulphate and increasingly refined nickel products.

That created a supply chain extending from laterite mines through industrial parks and downstream processing.

INSG expects global nickel mine production to grow another 7.8% in 2026 after projected growth of 8.9% in 2025\. Indonesia accounts for much of the increase.

The IEA also identifies Indonesia as the dominant nickel refining country and notes that virtually all recent growth in refined nickel supply has come from the dominant producer.

Nickel investors therefore have to underwrite Indonesian production growth almost as carefully as demand from EVs.

**The nickel market currently combines structural demand growth with structural supply concentration. Indonesia can continue increasing its share of world production even while global consumption rises.**

## There Is No Single Nickel Product

Nickel supply is frequently reduced to one headline production number even though the market contains materially different products.

Nickel pig iron and ferronickel primarily serve stainless steel production. High-purity Class 1 nickel can access other alloy markets and is deliverable against specific exchange standards. Nickel matte can be processed further. Mixed hydroxide precipitate, commonly called MHP, has become an important intermediate feedstock for battery chemical production. Nickel sulphate is used directly within battery cathode supply chains.

These products have different nickel content, impurity profiles, processing routes, customer bases and commercial economics.

A stainless steel producer can have strong demand for nickel units while a battery precursor plant requires a very different feed specification.

The ability to convert lower-grade laterite ore into intermediates suitable for battery processing was one of the developments that changed earlier assumptions about a potential shortage of battery-grade nickel.

Indonesia's expansion into MHP, matte and other intermediate products substantially widened the supply base available to battery manufacturers.

## The Nickel Price Alone Tells You Too Little About a Project

For mine investors, the relevant question is which nickel product the operation ultimately sells.

A sulphide mine producing clean nickel concentrate has a different cost structure from a laterite operation feeding a high-pressure acid leach plant.

A ferronickel operation selling into stainless steel faces different pricing from a project producing MHP for battery refiners.

Payability, treatment charges, refining charges, transportation, impurities and downstream conversion costs all sit between the quoted nickel price and mine-level revenue.

This is why contained nickel production is an incomplete measure of project economics.

## The Growing Market Is Putting Pressure on Higher-Cost Producers

Rapid Indonesian expansion has pushed nickel's marginal cost curve lower and placed pressure on operations elsewhere.

Projects in Australia, New Caledonia and other jurisdictions have faced difficult economics as nickel prices weakened while labor, energy and operating costs remained elevated.

For new projects, feasibility assumptions built around a structurally higher long-term nickel price deserve careful examination.

An investor or lender should understand where the proposed operation sits on the global cost curve after royalties, freight, sustaining capital and downstream processing requirements.

A large resource can still be uneconomic if its conversion cost remains above the price required to clear the market.

## HPAL Has Changed Laterite Economics

High-pressure acid leaching allows certain nickel laterites to be processed into intermediates such as MHP containing nickel and cobalt.

Historically, the capital intensity, technical complexity and environmental requirements associated with HPAL limited development.

Indonesia has deployed the process at increasingly large scale.

For investors, an HPAL project therefore requires detailed analysis of acid consumption, power, recovery, pressure systems, tailings, residue management, ramp-up performance and the reliability of supporting infrastructure.

Nominal nameplate capacity says little if metallurgical or maintenance problems prevent sustained production.

## Demand Growth Still Matters for the Marginal Tonne

A surplus today gives no assurance of permanent oversupply.

Nickel mines deplete. Operations close when prices remain below sustainable economics. Ore grades change. Indonesian mining quotas can affect available feed. Projects encounter delays. Environmental rules can increase costs. Processing plants need continuous reinvestment.

Meanwhile, every additional electric vehicle using a nickel-bearing cathode adds demand on top of stainless steel, aerospace, industrial alloy and plating consumption.

That means the long-term balance ultimately depends on which projects survive the current surplus and how quickly new demand absorbs spare capacity.

The IEA's 2026 analysis sees only a slight nickel supply gap in its base project case later in the outlook. If a larger group of early-stage projects reaches production on schedule, projected supply could cover demand.

Execution therefore matters as much as resource availability.

## What Nickel Investors Should Watch

Nickel exposure should be analyzed through unit economics rather than a simple macro thesis.

For an operating mine, investors should understand ore type, nickel grade, recovery, payable product, production cost, sustaining capital, mine life and access to processing infrastructure.

Laterite projects require particular attention to whether the operation produces nickel pig iron, ferronickel, matte or an HPAL intermediate. Sulphide projects should be evaluated around concentrate grade, by-products, recoveries, smelter terms and transportation.

Energy intensity matters because nickel processing can consume large amounts of power. The source and cost of that power can materially influence operating margins and carbon intensity.

Investors should also monitor Indonesian mining policy. Production quotas, ore availability, domestic processing requirements and environmental policy can alter supply more quickly than changes in demand from one battery chemistry.

For battery-oriented projects, the downstream customer also matters. Producing nickel units and producing a specification that battery chemical refiners will accept are separate technical achievements.

## The Nickel Investment Case Is Becoming More Selective

A broad bullish argument based solely on electric vehicles was easier to make several years ago.

The current market requires more discrimination.

Demand continues to expand. Stainless steel remains a large underlying market. Battery demand creates a second major growth channel. The IEA still expects materially more nickel consumption through 2040.

At the same time, Indonesian mine and processing investment has been exceptionally successful at bringing new supply into the market.

That puts greater importance on cost position, metallurgy, product specification, jurisdiction and access to infrastructure.

The strongest nickel assets will be those capable of generating acceptable returns at prices that force marginal production elsewhere to close.

For investors, that is a more useful thesis than simply assuming that rising demand produces rising prices.

**Nickel demand is growing. The investment opportunity sits in identifying the producers that can remain competitive while supply grows with it.**

## Frequently Asked Questions About Nickel Demand

### How much nickel does the world consume?

The International Nickel Study Group estimates global primary nickel usage at approximately 3.60 million tonnes in 2025 and forecasts consumption of around 3.82 million tonnes in 2026.

### Is global nickel demand increasing?

Yes. INSG forecasts approximately 6.2% growth in primary nickel usage between 2025 and 2026\. The International Energy Agency also expects materially higher long-term demand, with nickel consumption rising substantially through 2040 across its energy scenarios.

### What uses the most nickel?

Stainless steel remains the largest first-use market. Current industry data put stainless steel at roughly two-thirds of primary nickel demand. Batteries represent a smaller but faster-growing segment, followed by nickel-based alloys, plating and alloy steel.

### Why is nickel used in EV batteries?

Nickel is used in several lithium-ion cathode chemistries because it can support high energy density. Chemistries such as NMC and NCA therefore use nickel, although lithium iron phosphate batteries contain no nickel.

### Why are nickel prices under pressure if demand is growing?

Supply has recently expanded faster than demand. INSG expects a global primary nickel surplus of approximately 261,000 tonnes in 2026, with Indonesia accounting for much of the growth in mine and processing capacity.

### How much of the world's nickel comes from Indonesia?

INSG expects Indonesia to account for approximately 68% of global nickel mine production in 2026\. The country has also developed extensive downstream capacity producing nickel pig iron, matte, MHP, nickel sulphate and refined nickel.

### Will nickel demand increase through 2040?

The IEA expects substantial long-term growth. Its 2026 Critical Minerals Outlook estimates demand growth for nickel, graphite and rare earths of roughly 50% to 90% through 2040 depending on the scenario.

### Does more EV production automatically mean higher nickel demand?

EV production is only one factor. Battery chemistry matters. High-nickel NMC and NCA batteries use nickel, while LFP batteries avoid it. The mix of battery chemistries therefore affects the amount of nickel required for a given level of electric-vehicle production.

### Primary Sources

[International Nickel Study Group — The Nickel Market 2025–2026](https://insg.org/index.php/about-nickel/the-market-2025-12/?ref=blog.financely.io)

[International Energy Agency — Global Critical Minerals Outlook 2026](https://www.iea.org/reports/global-critical-minerals-outlook-2026/outlook?ref=blog.financely.io)

[International Energy Agency — Nickel Market Outlook](https://www.iea.org/reports/nickel-2?ref=blog.financely.io)

[Nickel Institute — Nickel Applications and First Use](https://nickelinstitute.org/en/nickel-applications?ref=blog.financely.io)

[U.S. Geological Survey — Mineral Commodity Summaries 2026: Nickel](https://pubs.usgs.gov/periodicals/mcs2026/mcs2026-nickel.pdf?ref=blog.financely.io)