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- Lucas: So, nickel. It's the metal that's supposed to power the electric vehicle revolution, but right now it's in such a glut that prices have fallen more than forty percent from their 2023 peaks. And the really interesting part is that this surplus is actually reshaping the entire battery chemistry landscape. Luna: A forty percent drop in two years is huge. What's driving it? Is it just a supply wave from Indonesia? Lucas: That's exactly it. Indonesia has gone from a minor player to the world's largest nickel producer in about five years, thanks to a ban on raw ore exports that forced companies to build processing plants there. It's a classic government industrial policy play, and it's worked almost too well. Luna: Too well meaning they flooded the market? I remember reading that Indonesia accounted for like half of global nickel output last year. That's an incredible shift. Lucas: Yeah, exactly. According to the International Nickel Study Group, Indonesia's production rose about thirty percent year-over-year in 2025 alone. The result is that the market has been in surplus for three straight years, and analysts don't see it balancing until 2028 at the earliest. Luna: So what does that mean for battery makers? Are they just enjoying cheaper inputs? Lucas: It's more complicated than that. Cheaper nickel obviously reduces costs for nickel-rich batteries like NMC — that's nickel manganese cobalt — but it also changes the competitive dynamics between different battery chemistries. For a while, everyone thought nickel was the future because it offered higher energy density. Luna: Right, but then lithium iron phosphate — LFP — came along as a cheaper, safer alternative that doesn't use nickel at all. So if nickel is cheap, does that hurt LFP's advantage? Lucas: You'd think so, but the surprising thing is that the nickel glut hasn't really slowed the shift to LFP. If anything, it's accelerated it. Chinese battery makers like CATL and BYD have been scaling up LFP production so aggressively that their costs are now lower than nickel-based batteries even with cheap nickel. Luna: So it's a race to the bottom on cost, and LFP is winning because it's simpler and doesn't rely on a volatile commodity supply chain? Lucas: That's one way to put it. But there's also a strategic angle. Automakers are terrified of supply chain concentration — over sixty percent of nickel processing is in Indonesia, and a lot of that is controlled by Chinese companies. So even with cheap nickel, some manufacturers are choosing LFP just to reduce geopolitical risk. Luna: Interesting. But isn't there a risk that the glut could reverse? I mean, nickel demand for EVs is still growing fast. Lucas: It is. The IEA projects nickel demand from EVs will triple by 2030. But here's the thing — supply is growing even faster. There are new mines and processing plants coming online in Indonesia, the Philippines, and even Canada. Plus, there's a lot of Class 2 nickel — that's the lower-grade stuff used in stainless steel — that can be converted to Class 1 for batteries if prices rise enough. Luna: So we might be in a structural surplus for a while. That has big implications for the whole energy transition narrative, doesn't it? Lucas: Absolutely. One of the biggest arguments against EVs has been the cost and volatility of raw materials. If nickel stays cheap and stable, it removes a major barrier. But it also means that the nickel miners who bet big on EV demand are getting crushed — shares of companies like Vale and BHP have underperformed the broader market this year. Luna: And what about the environmental angle? Indonesian nickel production has been criticized for relying on coal-powered processing. So cheaper nickel might come with a carbon cost. Lucas: That's a really important point. A lot of the new processing in Indonesia uses coal-fired power, which means the carbon footprint of that nickel is much higher than, say, nickel from Canada or Australia that uses hydro or nuclear. So automakers who claim their EVs are zero-emission actually have a dirty supply chain if they source Indonesian nickel. Luna: So the glut solves a cost problem but creates a sustainability problem. That's the kind of trade-off that doesn't get enough attention. Lucas: Exactly. And regulators are starting to notice. The EU's new battery passport regulations require full traceability of raw materials, including carbon footprint. That could eventually penalize high-carbon nickel, which would change the cost equation again. Luna: Let's zoom out a bit. How does this nickel glut fit into the bigger energy picture we've been talking about all month — the divergence between oil and renewables? Lucas: It's actually a perfect example of that divergence. Oil markets are tight right now — Brent is above eighty dollars, and geopolitical risks in the Middle East are keeping prices elevated. But battery metals like nickel and lithium are in surplus, which is depressing the cost of clean energy technologies. So you have this weird moment where fossil fuels are expensive and getting more so, while the inputs for electrification are getting cheaper. Luna: That sounds like it should accelerate the transition, right? Cheaper batteries mean cheaper EVs, which should eat into oil demand. Lucas: In theory, yes. And we are seeing EV adoption continue to grow, especially in China and Europe. But the pace is still constrained by charging infrastructure, grid capacity, and consumer hesitation. The nickel glut alone won't solve those problems. Luna: But it does make the economics more favourable. And if cheaper batteries also enable grid storage, that could help with renewable integration. Lucas: That's actually the sleeper story here. Stationary storage for the grid uses a lot of the same battery chemistry as EVs. If nickel stays cheap, it could make large-scale battery storage projects more viable, which is crucial for balancing intermittent solar and wind. So the nickel glut might end up helping renewables more on the storage side than on the EV side. Luna: So we're talking about a commodity surplus that's quietly reshaping multiple industries. That's the kind of thing our listeners might not hear about on the evening news. Lucas: That's exactly why we do this show. And speaking of which — if walking through the economy with us has made something click, or if you just enjoy getting this kind of context without ads, listener support is what keeps it going. You can buy us a coffee at buy me a coffee dot com slash fexingo. No pressure, just a simple way to say you value the work. Luna: Yeah, and it really does make a difference. Every contribution helps us stay independent and dig into stories like this one. Lucas: So back to nickel — the key takeaway is that this glut isn't just a temporary blip. It's a structural shift that's changing battery chemistry choices, supply chain strategies, and the economics of electrification. And it's happening right now, under the radar of most headline news. Luna: And it's a reminder that in energy economics, the most important stories are often about the stuff we don't see — the metals, the pipelines, the policy decisions — not just the price at the pump. Lucas: Exactly. Next time, we'll look at what's happening with lithium, which has its own surplus story — but a very different set of players and politics. Luna: Looking forward to it. For Energy Economics with Fexingo, I'm Luna. Lucas: And I'm Lucas. See you next time.