Guosen: Nickel resources are gradually becoming tight in supply and demand, and the center of prices is expected to further increase.

Guosen released a research report stating that global nickel resources are abundant, with a high concentration of production. Indonesia's nickel reserves account for approximately 44.5% of the total, with a production share of around 66.9%. Indonesia has a mature quota system and aims to raise the threshold and cost of nickel mining through policy adjustments. China is the world's largest consumer of nickel, with over 60% of global consumption of primary nickel expected to come from China. The bank believes that Indonesia's tightening of nickel supply policies is quite certain, with possible fluctuations in execution, but ultimately leading to a tightening of global nickel supply and demand, potentially lifting nickel prices further. Guosen's main points are as follows: Supply: Indonesia has become a center for global nickel production, with Indonesian nickel supply becoming a bottleneck in the industry chain Global nickel resources are abundant, with production highly concentrated. According to the latest data from the US Geological Survey (USGS), global nickel resources exceed 140 million tons, with a static recoverable annual limit of over 35 years based on an annual production of 3.8 million tons. As of 2025, Indonesia's nickel reserves accounted for around 44.5%, with a production share of around 66.9%; the Philippines accounted for around 3.5% of reserves and 7.0% of production; and Russia accounted for around 6.0% of reserves and 5.2% of production. China's nickel reserves and production account for only about 3% of the global total, making it highly dependent on imports. Indonesia is the world's largest nickel mining supplier and has a mature quota system. In February 2026, the Indonesian Ministry of Energy and Mineral Resources officially released the annual nickel mining work plan and cost budget (RKAB), reducing the nickel mining quota from 379 million tons in 2025 to 260-270 million tons in 2026, a decrease of about 30%. This may directly result in Indonesian nickel mining supply falling short of downstream demand. In April 2026, the Indonesian Ministry of Energy and Mineral Resources announced a new formula for calculating the benchmark nickel ore price (HPM), which significantly increases the pricing coefficient for nickel ore and includes cobalt, iron, and chromium by-products in the calculation. Under the new regulations, the benchmark price of Indonesian nickel ore will rise significantly, leading to a substantial increase in production costs for MHP, providing support for the production costs of NPI. In addition, the production of MHP relies on sulfuric acid, and Indonesia's sulfuric acid supply is mainly achieved through elemental sulfur for acid production. The blockage of the Strait of Hormuz will directly cut off the export channel of elemental sulfur from the Middle East, causing a chain impact on the highly dependent Indonesian MHP production, significantly increasing raw material costs. Demand: Nickel demand for stainless steel is steadily increasing, while demand for battery-grade nickel remains resilient Global nickel demand is mainly concentrated in the stainless steel and battery industries. According to statistics from Antaike, global stainless steel nickel consumption is expected to account for over 60% in 2026, while the battery industry's nickel consumption is expected to remain at around 17%. China is the world's largest consumer of nickel, with over 60% of global primary nickel consumption coming from China; within this, stainless steel consumes about 70% of nickel, the battery industry about 20%, electroplating around 3%, and alloy casting about 9%. In the stainless steel sector, according to data from the International Stainless Steel Forum (ISSF), global production of 300 series stainless steel was around 42.5 million tons in 2025, a 5.5% increase year-on-year; production of 200 series stainless steel was approximately 9.9 million tons, a 0.1% increase; and production of 400 series stainless steel was around 15.3 million tons, a 4.6% increase. Overall, production has remained stable. In the battery sector, SMM data shows that global production of ternary materials was approximately 1.69 million tons in 2025, a 4.6% increase year-on-year, with China's production at around 819,000 tons, a 19.4% increase. Additionally, from January to April this year, China's production of ternary materials was around 317,000 tons, a 42.2% increase, mainly due to the reduction of export tax rebates for domestic lithium batteries. The tax rate will be lowered from 9% to 6% from April 1 to December 31, 2026, leading to increased demand for exports. Supply and demand: Indonesia's nickel supply will drive future nickel price trends, with the midpoint price expected to rise further On the supply side, based on the estimated 2026 nickel mining quota of 260-270 million tons released by the Indonesian Ministry of Energy and Minerals, and considering supplementary imports from the Philippines, Indonesian primary nickel production is expected to remain stable or even decline slightly in 2026. Under these conditions, a reversal in the global supply and demand of primary nickel is expected, resulting in a certain deficit. If the Indonesian Ministry of Energy and Minerals adds 15-20% to the nickel mining quota in the middle of the year, along with supplementary imports from the Philippines, downstream demand can be met, and Indonesian primary nickel production is expected to increase by nearly 7% year-on-year in 2026. In this scenario, the global supply and demand for primary nickel is expected to remain in surplus. On the cost side, the rapid rise in sulfur prices leads to an increase in raw material costs, and the adjustment of the Indonesian nickel ore benchmark price (HPM) formula leads to an increase in material costs. Currently, the cost of high-grade nickel in Indonesia has risen to over $16,000 per ton, while the cost of MHP has risen to over $17,000 per ton, providing strong cost support for nickel prices. In conclusion, the bank believes that Indonesia, as the world's largest nickel mining producer, has a clear policy direction to tighten nickel supply, which may experience fluctuations in execution, but will ultimately lead to a tightening of global nickel supply and demand, potentially lifting the midpoint price of nickel. Related targets: Zhejiang Huayou Cobalt, LYGEND RESOURCE Risk factors: Unexpected global nickel and primary nickel supply; Weak global stainless steel demand leading to lower-than-expected nickel demand; Innovation in lithium battery materials leading to lower-than-expected nickel demand.