Class-1 versus Class-2: the nickel misread

Definitions

Class-1 nickel is refined nickel of ≥99.8 % purity, typically as cathode, briquette or powder. It is the input to battery precursor chemicals (nickel sulphate), to precision alloys, to aerospace-grade wire and to electrolyser mesh. The London Metal Exchange settlement price refers to Class-1 material.

Class-2 nickel is ferronickel or nickel pig iron (NPI) — typically 15–35 % Ni, high in iron and sulphur. It is the input to stainless steel. It cannot be used in battery precursor, precision alloys or electrolyser mesh without a further refining step that approximately doubles the cost.

The misread

When an analyst writes "global nickel market in surplus", the figure cited is typically total refined-nickel equivalent — treating Class-1 and Class-2 as fungible. They are not. The International Nickel Study Group publishes both series separately in its monthly bulletin, and the gap is visible in anyone looking at the right columns^[1].

Applied to the green transition, the misread matters because the demand side — battery, hydrogen, defence, semiconductor, precision mesh — is entirely Class-1. A Class-2 surplus does not feed those buyers. The only mechanism by which Class-2 affects Class-1 pricing is through conversion — and conversion capacity is itself limited, energy-intensive, and sitting in jurisdictions where Western buyers cannot always qualify the origin.

The chart the INSG doesn't publish directly

Fig. 1 — Class-1 supply minus total Class-1 demand, kilotonnes. GTX synthesis.

Implications for research and policy

1. Analyst models — total-market balance figures should not be used as a proxy for battery or electrolyser supply constraints.
2. Procurement teams — long-term supply agreements should specify Class-1 / NP1 / NP2 grade explicitly.
3. Policy — "critical materials" lists should separate Class-1 from Class-2 nickel to capture the actual supply constraint.