Global nickel reserves are abundant, but production is highly concentrated. Indonesia accounts for approximately 44.5% of global nickel reserves and about 66.9% of production. Indonesia also operates a well-established quota system and intends to raise the barriers and costs of nickel mining through policy adjustments. China is the world's largest nickel consumer, with its primary nickel consumption estimated to account for over 60% of the global total. As the world's largest nickel producer, Indonesia's policy direction towards tightening nickel ore supply is relatively certain. While the enforcement intensity may fluctuate, it is ultimately expected to tighten the global supply-demand balance for primary nickel, leading to a further increase in the nickel price floor.

Key points from Guosen Securities are as follows:

**Supply: Indonesia as the Global Nickel Production Hub; Its Nickel Ore Supply Becomes the Industry Bottleneck** Global nickel reserves are plentiful, but production is highly concentrated. According to the latest USGS data, global nickel reserves exceed 140 million tons. Based on an annual production of 3.8 million tons, the static recoverable period exceeds 35 years. As of 2025, Indonesia holds about 44.5% of global nickel reserves and contributes roughly 66.9% of production. The Philippines accounts for approximately 3.5% of reserves and 7.0% of production. Russia holds around 6.0% of reserves and contributes about 5.2% of production. China's share in both reserves and production is only about 3%, indicating a high dependence on imports.

Indonesia is the world's largest nickel ore supplier and operates a mature quota system designed to increase mining barriers and costs through policy. In February 2026, Indonesia's Ministry of Energy and Mineral Resources (ESDM) officially released the annual Nickel Ore Work Plan and Budget (RKAB), slashing the 2026 mining quota from 379 million tons in 2025 to 260-270 million tons, a reduction of about 30%. This could directly lead to Indonesian nickel ore supply failing to meet downstream demand. In April 2026, Indonesia's ESDM issued a new formula for calculating the Nickel Ore Benchmark Price (HPM). Besides significantly raising the nickel ore pricing coefficient, the new formula includes associated minerals like cobalt, iron, and chromium in the HPM calculation. Under the new rules, Indonesia's nickel ore benchmark price will rise substantially, significantly increasing the production cost of Mixed Hydroxide Precipitate (MHP) and supporting the production cost of Nickel Pig Iron (NPI). Furthermore, MHP production requires sulfuric acid, which in Indonesia is primarily produced from sulfur. The blockade of the Strait of Hormuz directly cuts off the Middle East sulfur export channel, creating a chain reaction impacting Indonesia's MHP production, which heavily relies on Middle Eastern supply, leading to a sharp increase in auxiliary material costs.

**Demand: Steady Growth in Stainless Steel Nickel Demand; Battery Nickel Demand Remains Resilient** Global nickel demand is primarily concentrated in the stainless steel and battery industries. According to estimates, stainless steel accounts for over 60% of global nickel demand in 2026, while the battery industry's share remains around 17%. China is the world's largest nickel consumer, with its primary nickel consumption estimated to exceed 60% of the global total. Within China, stainless steel accounts for about 70% of nickel consumption, batteries for about 20%, electroplating for about 3%, and alloy casting for about 9%.

* **Stainless Steel Sector:** According to ISSF data, global production of 300-series stainless steel reached approximately 42.545 million tons in 2025, a year-on-year increase of 5.5%. Production of 200-series stainless steel was about 9.898 million tons, up 0.1% year-on-year. Production of 400-series stainless steel was around 15.278 million tons, a year-on-year increase of 4.6%. Overall, the sector maintains steady growth. * **Battery Sector:** SMM data shows that global production of ternary cathode materials reached approximately 1.069 million tons in 2025, up 4.6% year-on-year. China's production of ternary cathode materials was about 819,000 tons, a significant increase of 19.4% year-on-year. Additionally, from January to April this year, China's ternary cathode material production was about 317,000 tons, surging 42.2% year-on-year. This high growth is mainly attributed to increased demand for front-loaded exports due to China's reduction of the export tax rebate for lithium batteries from 9% to 6%, effective from April 1 to December 31, 2026.

**Supply-Demand Balance: Indonesian Nickel Ore Supply to Dictate Future Nickel Price Trends; Price Floor Expected to Rise Further** On the supply side, if based on the 2026 Indonesian nickel ore mining quota of 260-270 million tons announced by ESDM, and considering supplementary imports from the Philippines, Indonesia's primary nickel production in 2026 is expected to be roughly flat or even decline year-on-year. Under this assumption, the global primary nickel market is projected to reverse into a deficit. If, however, Indonesia's ESDM adds a 15-20% mining quota mid-year, and with supplementary imports from the Philippines, downstream demand could be just met. Under this scenario, Indonesia's primary nickel production growth in 2026 could still reach nearly 7% year-on-year, and the global primary nickel market would likely remain in surplus.

On the cost side, rising sulfur prices are increasing auxiliary material costs, while adjustments to Indonesia's HPM formula are driving up raw material costs. It is estimated that the current cost of Indonesian nickel matte has risen to above $16,000 per ton, and the cost of Indonesian MHP has increased to above $17,000 per ton, providing strong cost support for nickel prices.

In summary, as the world's largest nickel producer, Indonesia's policy direction towards tightening nickel ore supply is relatively certain. While enforcement intensity may vary, it is ultimately expected to tighten the global supply-demand balance for primary nickel, leading to a further increase in the nickel price floor.

**Related Companies:** Huayou Cobalt, Lygend Resources **Risk Warnings:** Global nickel ore and primary nickel supply exceeds expectations; weak global stainless steel demand leads to lower-than-expected nickel demand; innovations in lithium battery materials reduce nickel demand.