In the first half of this year, the LME nickel price overall showed a wide fluctuating pattern of "two rounds of sharp rises followed by phased corrections", with the operating center significantly higher than that in the second half of 2025.

Under multiple disturbances

The production cuts in hydrometallurgical and pyrometallurgical nickel smelting have materialized

According to Mysteel data, in the first half of the year, the global total supply of primary nickel was 1.7748 million metric tons of nickel, a month-on-month decrease of 9.1% and a year-on-year decrease of 3.9%. The supply-side data directly confirms the production contraction effect brought by Indonesia's policy control and sulfur shortage in the first half of the year, and also provides fundamental support for the volatile rise of nickel prices.

In terms of nickel ore, factors such as policies, weather, and auxiliary material costs jointly dominated the nickel ore price and circulation pattern in the first half of the year. The Philippines' nickel ore showed a distinct seasonal trend: shipments were restricted due to the rainy season in the first quarter, pushing up ore prices; in the second quarter, the dry season saw increased supply and slower purchases by smelters, leading to a continuous decline in prices, and it gradually became a swing supply for Indonesia to fill the raw material gap. On the Indonesian nickel ore side, the tightening of RKAB quotas and the implementation of new HPM pricing rules reshaped the supply and pricing system, with scarce high-grade ore sources available for circulation, and the overall market maintained a tight balance. For pyrometallurgical ore, the premium rose sharply in the early stage, and the increase in the benchmark price after the implementation of the new rules compressed the spot premium; local high-grade ore was continuously depleted, pushing up the long-term cost floor. For hydrometallurgical ore, although it benefited from the revaluation of value as cobalt was included in pricing, HPAL smelters cut production due to sulfur shortages, weakening ore procurement demand and limiting the upside for ore prices.

In terms of ferronickel, in the first half of the year, the combined output of nickel pig iron (NPI) in China and Indonesia reached 953,500 nickel tons, a year-on-year decrease of 8.4%. Among them, the output of NPI in Indonesia and China diverged. In the first half of the year, Indonesia's NPI output was 808,900 nickel tons, a year-on-year decrease of 10.4%, while China's total NPI output was 144,500 nickel tons, a year-on-year increase of 4.8%. In the first half of the year, driven by the tightening supply of pyrometallurgical ore which pushed up ore prices and the rising costs of coal and electricity, the cost pressure on Indonesia's NPI smelting sector became prominent, and most smelters took the initiative to reduce their operating loads. Indonesia's high-grade nickel ore is gradually being depleted, the average grade of ore fed into furnaces continues to decline, and Indonesia's NPI production has been under sustained pressure, with both total output and finished nickel grade falling simultaneously. In addition, there is power competition between electrolytic aluminum and NPI projects in the IWIP park. Under the expectation of power shortage, Tsingshan Company prioritized ensuring power supply to aluminum smelters in June, forcing the NPI production lines to cut output, further amplifying the pressure of supply contraction. In contrast, in China, Indonesia's series of policies raised local smelting costs, significantly narrowing the cost advantage of overseas NPI. After the profitability of China's inefficient NPI production lines recovered, the enthusiasm for production picked up somewhat.

In terms of pure nickel, in the first half of the year, China's cumulative output of refined nickel reached 205,900 tons, a year-on-year decrease of 2.1%. At present, the installed capacity of equipment for China's refined nickel enterprises is 52,300 tons, the operating capacity is 49,500 tons, and the capacity utilization rate is 94.74%. In the first half of the year, affected by the production reduction of MHP, China's pure nickel output dropped year-on-year, but the reduction range was limited. At present, Grade 1 nickel is still the variety with the most prominent surplus among primary nickel categories, and social inventories continue to accumulate, significantly suppressing the upside momentum of nickel prices.

In terms of intermediate products, in the first half of the year, Indonesia's cumulative MHP output was 200,100 nickel tons, a year-on-year decrease of 10.4%. In the first half of the year, the output of hydrometallurgical products was under pressure, mainly due to the dual constraints of sulfur and nickel ore. Geopolitical conflicts in the Middle East pushed up sulfur prices, which significantly eroded the profits of HPAL smelting. Enterprises such as Lunde, Huafei, and Huayue took the initiative to cut production by 10% to 50%; coupled with the suspension of production for rectification due to tailings dam accidents in projects such as QMB from February to March, the overall output was further suppressed. From May to June, although Indonesia's MHP output recovered month-on-month, it still saw a significant year-on-year decline, and the progress of commissioning new hydrometallurgical production capacity within the year may slow down. In terms of nickel salts, in the first half of the year, China's nickel sulfate output was 208,000 nickel tons, a year-on-year increase of 36.6%. Driven by cost-side support and a rebound in demand, the nickel sulfate market maintained a high prosperity.

Steel demand remains resilient

Demand for ternary batteries has rebounded

According to Mysteel data, in the first half of the year, the total global demand for primary nickel was 1.7304 million nickel tons, a month-on-month increase of 1.5% and a year-on-year increase of 3.8%. In the first half of the year, the global surplus of primary nickel was only about 44,400 nickel tons, a significant narrowing of the surplus compared with the same period last year.

As the largest consumption sector for nickel, stainless steel has maintained a steady operation. According to statistics, in the first half of the year, China's crude stainless steel output reached 21.19 million tons, a year-on-year increase of 7.2%. From the production side, domestic stainless steel steel mills maintained a relatively high operating rate overall in the first half of the year. Steel mills took the initiative to control the rhythm of capacity release. Supported by the cost side, the overall profit level of the industry has been significantly restored, and the operational quality has improved remarkably compared with previous years.

In terms of new energy vehicles, data from the China Association of Automobile Manufacturers shows that in the first half of the year, the production and sales of new energy vehicles in China reached 7.438 million units and 7.446 million units respectively, a year-on-year increase of 6.7% and 7.3% respectively, and the export of new energy vehicles was 2.355 million units, a year-on-year increase of 1.2 times. Data from the China Automotive Power Battery Industry Innovation Alliance shows that in the first half of the year, the cumulative installed capacity of power batteries in China was 33.56 GWh, a year-on-year increase of 12.0%. Among them, the cumulative installed capacity of ternary batteries was 6.34 GWh, accounting for 18.9% of the total installed capacity, with a cumulative year-on-year increase of 14.2%. In 2026, the continuous improvement of the power capacity per new energy vehicle, the explosive growth of overseas exports, and the release of structural demand for overseas high-end models will provide solid support for the demand for ternary batteries. According to statistics, the output of ternary materials in the first half of the year was 493,000 tons, a year-on-year increase of 40.0%.

Looking ahead, supply-side contradictions remain the core variable, and attention needs to be paid to policy disruptions such as Indonesia's RKAB and the sulfur supply situation.

From the supply side, regarding nickel ore, with the continuous replenishment of nickel ore in the Philippines and the moderate increase in the RKAB quota in the middle of the year, Indonesia's nickel ore supply is expected to maintain a tight balance in the second half of the year. Among them, RKAB approval is the core variable, and attention should be paid to the rhythm and volume of quota approval by Indonesian authorities after August. For nickel pig iron, in the second half of the year, its output is highly dependent on the supply and demand of nickel ore and the trend of ore prices. If pyrometallurgical ore remains at a high price and the supply of high-grade ore is tight, Indonesia's nickel pig iron output is difficult to recover substantially; coupled with the continuous contradiction of "power competition" between park aluminum and nickel, there is still an expectation of production reduction for Indonesia's nickel pig iron. For hydrometallurgy, the Middle East situation remains the biggest variable in the second half of the year. Overall, it is expected that sulfur prices will continue to maintain a high premium in the short term in the second half of the year, MHP production costs are likely to remain at a high level, and the ramp-up of new MHP production capacity in 2026 may slow down.

From the demand perspective, prices of various stainless steel grades achieved substantial gains in the first half of the year. It is expected that the bullish sentiment in the market will gradually shift from being cost-driven to focusing on whether demand can sustain in the second half. If demand fails to sustain, supply pressure may intensify. In comparison, with current profits remaining in positive territory, some steel mills still maintain relatively high operating rates and have a weak willingness to cut production. It is projected that although stainless steel output will decline month-on-month in the second half of the year, it will remain resilient year-on-year. The annual nickel demand is expected to maintain a growth rate of 4% to 5%. In terms of new energy, although the substitution of lithium iron phosphate for ternary materials is still ongoing, overseas cell manufacturers and terminals have stable demand for high-nickel ternary materials. Coupled with the cancellation of lithium battery export tax rebates next year, this will theoretically have a certain front-loading effect on orders this year. It is expected that nickel usage for batteries will maintain a growth rate of over 10% in the second half.

Overall, the tight supply pattern in the nickel industrial chain continues, and two major variables need to be followed subsequently: the replenishment of Indonesia's RKAB quotas and the stability of sulfur supply in the Middle East.

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