Nickel market volatility and its implications for the global energy transition

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With applications spanning electric vehicles, energy storage projects, wind turbines and electrolysers for green hydrogen production, nickel has long been expected to play an instrumental role in the global energy transition.

In particular, nickel’s ability to increase the energy density and performance of Li-ion batteries without sacrificing weight has made it a key component of many EV battery cathodes, with chemistries such as nickel cobalt aluminium (NCA) and nickel manganese cobalt (NMC) comprising 80% and 60-80% of nickel, respectively.

As a result of its properties, the Energy Transition Commission (ETC) identified nickel as holding a medium-high risk level within its 2023 report, estimating that nickel demand could increase from 3.3 million tonnes per annum (mtpa) in 2025 to 7.5mtpa in 2040 as a result of both nickel’s traditional consumer industries as well as added energy transition demand. The ETC’s report also identified the need for increased production, predicting a potential 15% shortfall between nickel demand and mine reserves by 2030. High-purity nickel that can be used within cathode elements was forecast to present the biggest supply challenge.

Despite the expected increase in nickel demand across the medium-long term, the market has been gripped by volatility in recent years.

Geopolitical events, protectionist measures from governments and a rapid scaling of production, particularly from Indonesia, have caused severe price fluctuations, with significant consequences for reliant clean technologies. For example, nickel experienced a stark increase in prices triggered by Russia’s invasion of Ukraine in February 2022 as well as a price shock on the London Metal Exchange, with GlobalData reporting that average prices increased from $18,475/tonne in 2021 to $25,638/tonne in 2022. Although annual nickel prices fell back to $16,818/ tonne in 2024, the volatility of the market holds significant ramifications for sectors such as EVs, where the price handed to consumers has remained stubbornly high compared to that of internal combustion engines.

Further volatility will continue rock the industry in 2025 as a result of the global market’s reliance on Indonesia as a supply source.

Indonesia has emerged as the world’s largest supplier of nickel in recent years, with GlobalData estimating that Indonesia alone accounted for 53% of global production in 2024.

Indonesia’s growth as a top nickel producer has been chiefly driven by the government’s 2020 decision to ban raw nickel exports, leading to often Chinese-led foreign direct investment into smelting and battery material processing plants.

Furthermore, Indonesia’s role as a nickel-producing power was heightened following the Russia-Ukraine conflict, which saw a global effort to diversify supplies away from Russia, causing Russia’s share of global nickel production to fall from 11.5% in 2020 to 6.1% in 2024.

As a result, Indonesia holds 15 operating mines with plans to scale its mining operation further with an additional 22 projects currently in various stages of development. Furthermore, Indonesia also accounts for 136 upcoming smelting or nickel processing facilities.

Although the main end destination of Indonesia’s nickel is stainless steel production is China, the country’s build-out of its nickel processing capability has taken place with the view to convert its low-grade nickel deposits into battery-grade material. Although the harmful environmental effects of nickel processing such as contamination from the tailings of high-pressure acid leaching (HPAL) have caused local opposition, the nation has largely looked poised to capitalize on increasing demand for nickel as the global energy transition gained momentum.

Despite predictions of a potential supply shortage historically, the nickel market has recently found itself grappling with oversupply. China’s deepening real estate crisis has suppressed nickel demand from the steel sector and has caused a supply glut in the market, which has been exacerbated by the slower-than-expected global uptake of electric vehicles. Consumer-side challenges to EV adoption include high upfront costs, raised electricity prices, and wide variations in the availability of charging infrastructure especially outside of urban centres. Meanwhile, shifting levels of policy support including U-turns on the phase-out of internal combustion vehicles have thrown automakers manufacturing plans into disarray, hampering the scale-up of EVs on the production side. As a result of this market uncertainty, GlobalData’s Automotive division reported that the annual growth in sales of light electric vehicles and hybrids fell from 10.2% in 2023 to 1.8% in 2024.

In addition to sluggish EV uptake, nickel may also face lower-than-expected demand because of a move to alternative battery chemistries. Although nickel-based batteries offer high energy density, alternatives such as lithium-ion phosphate batteries offer lower costs and better performance over repeated charge cycles, addressing two key concerns for EV adopters. As a result, recent years have seen an increased number of automakers such as Ford, Tesla, Mercedes, and Nissan all either completely switching or providing LFP variants within their EV models. While the diversification of battery chemistries will provide a level of insulation between the price volatility of commodities such as nickel and clean technology markets, this trend will pose a problem to nickel producers that bet big on the role of nickel in EVs.

The combination of weak demand coupled with continued high production is already being felt across the industry, with low nickel prices causing many plans for new projects to be mothballed or permanently scrapped. For example, in July 2024 BHP announced that the operations of Western Australia Nickel would be temporarily suspended.

GlobalData is currently tracking 77 nickel projects that are on hold, often due to poor market conditions, with countries such as Canada and Australia accounting for the most suspended projects.

The effects are also starting to be felt more acutely by producers in Indonesia, as the country starts to restrict the industry in a bid to elevate prices. This has largely taken place through reductions to nickel ore mining quotas, with significant consequences for smelters. For example, in February 2025 it was announced that one of Indonesia’s largest smelters, T Gunbuster Nickel Industry was close to completely shutting down following the collapse of its parent company.

The current situation feels far removed from the narrative of a supply shortage, but the market instability does pose a challenging backdrop to producers that seek to reliably scale low-carbon technologies. As the nickel market continues to struggle with the recent rapid scaling of its own supply, the commodity is a key case in point for the need for a diversified and risk-weighted approach to critical minerals within energy transition supply chains.