The nickel supply deficit widens again — and RWAs are paying attention

The INSG's Q1 2026 data has tightened the Class 1 nickel deficit again — now estimated at 142 kilotonnes for the year, up from 108 kilotonnes in the Q4 2025 reading. For RWA investors watching the commodity-backed sub-category, this is the release that matters.

The deficit is Class 1, not Class 2

Much of the 2024–2025 headline narrative focused on Indonesian Class 2 nickel flooding the market and depressing LME prices. What changed in Q1 2026 is that the bifurcation between Class 1 (battery-grade, high-purity) and Class 2 (stainless-steel feed) is now visible in the aggregate data. Class 2 supply remains abundant. Class 1 is increasingly scarce — and the scarcity is structural, not cyclical.

Four demand sinks are driving Class 1 consumption past available supply: EV battery cell production (cathode chemistry requires Class 1), hydrogen electrolyser build-out (nickel wire for PEM and alkaline stacks), aerospace EMI shielding (a specialty but growing call on NP1 stock), and emerging PGM-substitution applications. None of these are going to slow.

Why RWA structures are responding

A structural deficit in a specific commodity grade creates an obvious problem for on-chain exposure: most commodity-backed tokens reference LME spot or bulk cathode, which is the wrong pricing reference for NP1-grade wire or drawn forms. Tokens that reference the form-factor premium — rather than raw commodity index — capture the structural thesis more accurately.

The ALKN case

This is, in direct terms, the thesis behind ALKN. The LP interest is backed by 7,026,905 linear metres of 99.99% NP1 nickel wire — the specific form factor in structural demand. At the USD 1.64B valuation performed by Aranca, the implied per-metre value reflects NP1 premium pricing, not LME bulk. As the deficit persists, the premium widens. Whether that translates into realised returns depends on the waterfall and the staged-sales execution — but the structural exposure is unambiguous.

What to watch

• Indonesian export policy direction — Class 2 supply could surprise to the downside if policy tightens further.
• Chinese electrolyser OEM capacity additions — a major incremental NP1 demand source.
• LME warehouse inventory bifurcation by grade — currently published in aggregate; disaggregation would clarify the thesis.