What it is used for
Around two-thirds of nickel goes into stainless steel, where it provides corrosion resistance. The rest goes into alloys, plating and — the growth story — battery cathodes, where higher nickel content raises energy density.
That split creates a forecasting trap. Battery demand is the exciting part of the story but the smaller part of the volume, and much battery-grade demand has shifted towards lithium iron phosphate chemistry that uses no nickel at all. Indonesia, meanwhile, has expanded production enormously, turning a tight market into a surplus.
Class 1 and Class 2
Not all nickel is interchangeable. Class 1 is high-purity metal, deliverable against the LME contract and usable in batteries. Class 2 includes nickel pig iron and ferronickel, which are cheaper, produced in huge volume for stainless steel, and not LME-deliverable.
This matters because the exchange price refers to a small, specific subset of total production. A surplus of Class 2 does not automatically relieve tightness in Class 1, and the deliverable stock behind the LME contract has at times been very small relative to open interest.
March 2022
On 8 March 2022, the LME nickel price rose from around $50,000 to over $100,000 a tonne in a matter of hours, having roughly doubled the previous day. A large short position, held by a Chinese producer hedging physical output, could not meet margin calls, and the attempt to close it drove a self-reinforcing squeeze.
The LME suspended trading and then took the extraordinary step of cancelling several hours of executed trades, reversing roughly $4bn of gains for those on the right side. Hedge funds sued; the exchange ultimately prevailed in the English courts, which found it had acted within its powers.
The episode is worth studying because it demolishes an assumption most traders hold implicitly: that a trade executed on a regulated exchange is final. Nickel volumes and confidence took years to recover, and the LME faced regulatory censure over its market oversight.
Supply concentration
Indonesia now dominates global production, having banned raw ore exports to force processing onshore. That policy succeeded spectacularly at building domestic industry and at flooding the market — with significant environmental controversy attached, which has in turn created a premium for nickel certified as responsibly produced.
How you would actually trade it
Professional market. Retail exposure is via industrial metals ETCs, broad commodity baskets, or miner equities such as Glencore, Vale and Nornickel-exposed funds.
Anyone trading nickel derivatives should understand the deliverable stock position and open interest, because this is the contract that has most recently demonstrated what a squeeze looks like.
What goes wrong
- Squeeze risk is proven, not theoretical. The 2022 episode included cancelled trades.
- Deliverable stock can be small relative to open positions.
- Indonesian policy effectively sets global supply.
- Chemistry substitution. LFP batteries use no nickel, and its share has grown.
- ESG bifurcation. Certified and uncertified metal increasingly trade differently.
This entry describes how a market works. It is not a recommendation, a price forecast, or advice about whether this belongs anywhere near your money. How entries are written.