The global nickel supply chain has been transformed by Indonesia's rapid ascent to dominance. Following the implementation of an ore export ban in 2020 and significant downstream refining investment, Indonesia now accounts for ~60% of global refined nickel output, reshaping both physical trade flows and pricing dynamics.

The country's vast laterite resources yield lower‑grade ore (typically around 1%–2% nickel) that can be processed through multiple routes, supporting both the traditional stainless‑steel industry and the fast‑growing battery materials sector.

How is Indonesia reshaping nickel processing?

Historically, most Indonesian laterite has been smelted into ferronickel or nickel pig iron (NPI), essential feedstock for stainless‑steel manufacturing. Increasingly, however, producers are converting part of this material into nickel matte - an intermediate product refined into compounds suitable for use in electric vehicle (EV) batteries.

Why are western producers losing competitiveness?

By contrast, Western producers focus largely on Class 1 nickel - a high‑purity (>99.8%) form refined in jurisdictions such as Canada, Australia, and Finland. Although Class 1 nickel (notably nickel briquettes) can be converted into battery‑grade sulphate, the additional processing stages increase costs compared with Indonesia's laterite‑derived feedstock.

As a result, conventional metal producers are losing competitiveness in supplying the battery sector. Policy frameworks in the US and EU offer incentives for regional refining and sulphate production, but progress remains slow due to technical complexity, high capital cost, and lengthy permitting timelines.

What does this mean for the global nickel market?

This divergence has created a structural disconnect between the traditional Class 1 metal market and the expanding battery‑grade segment. Output of low‑cost nickel sulphate from Indonesia and China continued to increase while London Metal Exchange (LME) inventories of Class 1 nickel rose and benchmark prices weakened. The contrast became clear after the 2022 nickel short squeeze, when prices spiked amid liquidity pressure before falling sharply through 2023-2025 as new Indonesian capacity came online.

Given its leading position in the nickel supply chain, the Indonesian government has since sought to reign in a growingly oversupplied market to stabilise prices and state revenues. Since 2025, a number of policies have been enacted to increase royalties and control output by capping nickel ore production quotas, also known as RKABs.

From mine to cathode, the nickel supply chain now reflects a decisive eastward shift in industrial geography. Control over intermediates refining capacity - rather than mined tonnage - has become the key source of market dominance, positioning Indonesia and China at the centre of the global nickel battery materials economy.

Nickel demand from the battery sector is expected to almost triple over the next decade, reaching ~1.5m t by 2035. Growth will be driven by rising EV production and wider adoption of high‑energy‑density batteries for long‑range and premium models.

The battery sector's share of total nickel demand is forecast to increase from 16% today to 27% by 2035. Stainless steel, however, will remain the largest end‑use segment.

Can supply keep pace with rising battery demand?

On the supply side, expansion is set to match demand growth. Indonesia, already the world's leading nickel producer, is pursuing an aggressive build‑out of high‑pressure acid leach (HPAL) projects and integrated industrial parks.

The pipeline of new capacity exceeds projected demand growth, heightening the risk of persistent oversupply through the remainder of the decade -particularly if lithium iron phosphate (LFP) batteries continue to gain market share. LFP chemistries, which do not require nickel, are increasingly favoured by Chinese manufacturers for low‑cost, mass‑market EVs.

By contrast, Western OEMs including General Motors, Ford, and BMW remain focused on high‑nickel cathode chemistries such as NCM and NCA to meet performance and range requirements. This regional divergence will continue to define nickel demand dynamics through the next decade.

How will recycling and policy shape nickel supply?

Recycling is set to play a greater role in supply. With recovery rates above 95%, nickel is the most valuable element recovered from end‑of‑life batteries. Recycled material is projected to meet ~24% of battery‑sector nickel demand by 2035, helping to relieve pressure on primary supply.

Geopolitical and policy factors will also shape the market. The US and Europe are working to reduce reliance on Chinese‑owned production. Western governments have introduced policies supporting domestic processing, but new capacity will take years to develop and require substantial investment, constraining near‑term diversification.