In July 2026, China's refined nickel production continued its downward trend. According to a Mysteel survey of 22 sampled enterprises nationwide, China's refined nickel output for July stood at 30,787 tonnes—a decrease of 3.06% month-on-month and 14.84% year-on-year. Cumulative production from January to July totaled 236,710 tonnes, down 3.97% year-on-year. Currently, domestic refined nickel production capacity stands at 52,681 tonnes, with an operating capacity of 41,465 tonnes; the operating rate is 78.71% and capacity utilization is 58.44%, meaning a significant portion of equipment remains idle or under maintenance. Large-scale producers in Quzhou, as well as small- and medium-sized producers in Zhoushan, Qinzhou, and other regions, have largely scaled back output due to poor profitability. China's estimated refined nickel production for August 2026 is 30,575 tonnes, representing a month-on-month decline of 0.69% and a year-on-year drop of 16.68%.

Data indicates that as of August 3, the cost of producing electrowon nickel from purchased nickel sulfate was approximately 143,200 yuan/tonne; from purchased MHP (Mixed Hydroxide Precipitate), it was about 143,200 yuan/tonne; and from purchased high-grade nickel matte, it was around 142,000 yuan/tonne. Meanwhile, the average spot price for 1# nickel in Shanghai was approximately 131,400 yuan/tonne, meaning that producing electrowon nickel from purchased raw materials remained a loss-making endeavor across the board. For integrated enterprises, the cost of producing electrowon nickel from MHP was as high as 160,200 yuan/tonne, while the cost using high-grade nickel matte was 156,900 yuan/tonne—both figures exceeding current spot prices. Amidst persistent pressure on profits, many smelters have opted to reduce operating loads and cut production. The continued decline in nickel prices is the most direct cause of these losses; additionally, tight sulfur supplies have driven up costs in the MHP-to-refined-nickel value chain, while Indonesia maintains restrictions on raw material exports.

On the policy front, the approval of Indonesian RKABs (Work Plan and Budget) is the market's primary focus. The application window for RKABs closed on July 31, with approval results expected to be announced between August and September. The Indonesian government has clearly stated that there are no plans to raise national quotas in 2026; approvals will be limited to special cases, resulting in negligible volume increases.

However, despite declining production, inventory pressure has not been effectively alleviated. As of July 31, LME nickel inventories stood at 266,172 tonnes, down 15,354 tonnes from the end of March; SHFE inventories were 101,152 tonnes, up 44,083 tonnes; and domestic social inventories of pure nickel (tracked by Mysteel) were 118,428 tonnes, up 32,351 tonnes. While LME inventories have seen a moderate drawdown, SHFE inventories continue to accumulate. Previously, China alleviated inventory pressure by exporting refined nickel; however, with the periodic widening of the price spread between domestic and international markets and the opening of import arbitrage windows, China has reverted to being a net importer of refined nickel, significantly increasing domestic inventory accumulation pressure.

Current losses in refined nickel production stem from a combination of three factors: falling nickel prices, rigid costs, and sluggish demand; consequently, all production pathways are operating at a loss. These losses have persisted for nearly three months—since profitability turned negative in mid-May—directly driving a continuous decline in domestic refined nickel output. Nevertheless, inventory pressure remains unresolved, and production cuts have yet to translate into a substantive improvement in market fundamentals. Furthermore, given the current scale of losses, enterprises are opting to reduce operating loads rather than permanently shut down facilities, meaning production capacity could recover rapidly should nickel prices rebound or costs decrease. Thus, while refined nickel production cuts are intensifying, the oversupply landscape remains fundamentally unchanged; nickel prices are expected to fluctuate within a range, supported at the bottom but capped at the top. (Source: Sina Finance)

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