Nickel and lithium markets are navigating sharply divergent demand drivers in 2026, with stationary battery storage emerging as the dominant force behind lithium consumption growth while nickel remains anchored to stainless steel and increasingly shaped by Indonesian supply policy, according to analysis published by Crux Investor. Global lithium consumption grew 45% through May 2026, according to data cited from Albemarle, exceeding the company's own forecast range of 15% to 40%. Albemarle's second-quarter 2026 Energy Storage net sales rose 78% to $1.28 billion, supported by an 11% increase in lithium volumes and a 60% increase in realized prices.
The outperformance comes despite a notable weakening in Chinese electric vehicle sales, which fell 13% in the first half of 2026 following subsidy withdrawal, according to data from the China Association of Automobile Manufacturers. The disconnect between weakening EV sales and rising lithium demand is explained by the rapid expansion of stationary battery storage. Global battery storage deployment reached 108 gigawatts in 2025, up 40% from 2024, with around 80% of new capacity installed at utility scale, according to the International Energy Agency.
Chinese battery production rose 53.3% in the same period, while battery exports reached 181.3 gigawatt-hours, up 42.5%, according to the China Automotive Battery Innovation Alliance. Critically for nickel markets, grid-scale storage predominantly uses lithium iron phosphate cathodes, a chemistry that contains lithium, iron and phosphate but no nickel, cobalt or manganese. LFP now accounts for 99.9% of the energy storage system market and 70.7% of the Chinese automotive battery market.
This means additional storage capacity is generating lithium demand without creating equivalent nickel demand, a structural divergence with significant implications for both markets. On the pricing front, lithium carbonate traded at CNY 144,500 per tonne on August 10, 2026, representing a year-on-year increase of 93.96%. The contract had touched a near six-month low of CNY 140,000 per tonne in early August before recovering, and the most-active Guangzhou Futures Exchange contract fell as low as CNY 136,800 per tonne on July 21, its lowest since February 10 and nearly 30% below its mid-May two-year high above CNY 200,000.
Fastmarkets has raised its 2026 lithium carbonate price forecast to $23.80 per kilogram from $17.40 per kilogram and its 2027 forecast to $31.40 per kilogram from $22.65 per kilogram. The IEA, in its 2026 Global EV Outlook, warned that sustained high lithium prices could strengthen the case for sodium-ion chemistries that contain no lithium, introducing a substitution risk that market participants are monitoring closely. Additional policy headwinds include China's planned increase in the lithium-ion battery consumption tax to 4% in 2027 and the reduction of the battery export tax rebate to zero.
On the supply side, recent additions include CATL's Jianxiawo mine receiving safety permits through February 27, 2028, Mineral Resources targeting a restart of Bald Hill after an 18-month suspension, and Core Lithium restarting its Finniss operation. Lithium Ionic has advanced its 100%-owned Bandeira Lithium Project in Brazil, securing water access, completing a three-year mine plan and basic engineering for two underground mine portals, and beginning procurement for portal construction and main crushing units. For nickel, the market outlook is increasingly dominated by Indonesia's ore quota policy.
The International Nickel Study Group forecasts 2026 primary nickel production of 3.715 million tonnes against usage of 3.747 million tonnes, creating a 32,000-tonne deficit and the first annual deficit since 2021. Indonesia's 2026 Work Plan and Budget ore quota was set at 260 million to 270 million tonnes, down from 379 million tonnes in 2025. Weda Bay Nickel's allocation fell to 12 million tonnes from 42 million tonnes, forcing the mine to halt ore production after exhausting its quota at the end of May 2026.
LME nickel traded at $16,859 per tonne on August 10, 2026, up 10.01% year on year. However, quota news has proven to be a significant source of price volatility. On August 6, a report of a large supplementary Indonesian allocation sent the Shanghai Futures Exchange ni2609 contract down 2.57% and LME nickel down 2.89% in a single session.
Physical market conditions are pointing to tighter supply, with Indonesia importing 8.87 million tonnes of nickel ore in the first half of 2026, including 8.58 million tonnes from the Philippines. Rotary kiln electric furnace utilization fell to roughly 76% from 84%, while LME stocks declined to 266,172 tonnes by July 31 from 274,584 tonnes at the end of June. The broader supply concentration issue is also drawing regulatory attention.
The IEA notes that Indonesia supplied almost two-thirds of mined nickel in 2025, while refining capacity outside Indonesia and China could meet only about one-third of remaining global demand. On August 6, 2026, the US Commerce Department announced a one-year block on exports of tungsten scrap and lithium-ion battery black mass, effective August 27, redirecting contained nickel, cobalt, lithium and manganese toward domestic processing. Projects outside Indonesia advancing toward development are attracting increased attention given these concentration risks.
Canada Nickel reported its highest-grade drilling results to date at the 100%-owned Reid Nickel Sulfide Project in Ontario, including 1.01% nickel over 4.5 meters within a broader 0.29% nickel interval over 576.6 meters. Reid's January 2026 resource contains 2.0 million tonnes of nickel in the Indicated category and 3.2 million tonnes in the Inferred category. Lifezone Metals advanced the Kabanga Nickel Project in Tanzania into large-scale procurement, releasing approximately $854 million of contracts to market, while filing an application for the project to be registered as a Strategic Project under the European Union's Critical Raw Materials Act.
According to the International Nickel Study Group, stainless steel accounts for more than 60% of global nickel consumption, and battery demand has grown more slowly than earlier forecasts as LFP has gained market share and plug-in hybrid demand has outpaced battery electric vehicles in several markets. The final determination of Indonesia's 2026 ore quota remains the key near-term variable for nickel prices, with revision proposals filed by the July 31 deadline. Indonesia's Energy and Mineral Resources Minister Bahlil Lahadalia was reported to have said any adjustments would be measured and could affect prices.
Source: cruxinvestor.com