Huachuang Securities has released a research report indicating that global nickel resources are abundant yet highly concentrated. Assuming Indonesia imports 20 million tons from the Philippines in 2026, under Indonesia's quota of 260-270 million tons, the static balance for Indonesian nickel ore is projected to still face a shortfall exceeding 30 million tons. Industry demand shows clear divergence, with traditional demand remaining stable but weak, while solid-state batteries open up future growth potential. The firm anticipates that sulfur prices will struggle to return to historical lows, leading to a cost restructuring for hydrometallurgical nickel. However, as sulfur prices gradually decline, profitability for hydrometallurgical enterprises is expected to recover.
Indonesia Dominates Global Nickel Supply, Resource Nationalism Curbs Supply Growth
Global nickel resources are abundant and highly concentrated. According to USGS data, global nickel reserves stood at 140 million tons in 2025. Indonesia, leveraging its rich laterite nickel ore resources, holds a core position in global nickel mining production, accounting for 67% of global nickel ore output in 2025, followed by the Philippines at 7%. Since 2025, under the wave of resource nationalism, Indonesia has strengthened its control over nickel resources through adjustments to the HMA pricing mechanism and PNBP tax system reforms. In 2026, Indonesia's nickel ore mining quota has been cut from 379 million tons to 260-270 million tons, a reduction of nearly 30%. The revised HPM pricing formula has simultaneously raised nickel ore coefficients, with cobalt, iron, and chromium by-product metals now included in pricing for the first time, restructuring the nickel ore pricing system. Currently, the Philippines serves as the world's largest nickel ore exporter and, amid Indonesia's quota reduction, has become an important supplement for Indonesian nickel smelting raw materials, though actual incremental supply remains limited. Assuming Indonesia imports 20 million tons from the Philippines in 2026, under Indonesia's 260-270 million ton quota, the static balance for Indonesian nickel ore is still projected to show a shortfall of over 30 million tons.
Indonesia Holds Core Position in Global Nickel Smelting, Raw Material Disruptions Weaken Supply Across Multiple Smelting Products
Nickel pig iron is the primary primary-nickel product, with Indonesia currently being the largest producer. On the margin, Indonesian NPI supply is showing a contraction trend. Nickel sulfate represents an important increment in primary nickel supply, with global supply concentrated in China. Currently facing overcapacity, its 2026 production pace is constrained by raw material imports from Indonesia, leading to a tightening supply situation. MHP supply is highly concentrated, with core supplier Indonesia seeing reduced output in 2026. China is the core consumer and importer of MHP globally, with high external dependency, and raw material supply is simultaneously tightening. Regarding matte nickel, Indonesia is the world's largest producer. Since 2026, due to Indonesia's nickel policies and rising raw material costs, supply release pace weakened marginally in Q2, with slight recovery in July. For refined nickel, supply is currently dominated by China and Indonesia, with operating rates constrained by profit margins and import dynamics.
Demand Divergence Is Clear, Traditional Demand Remains Stable but Weak, Solid-State Batteries Open Future Growth Space
Nickel downstream applications are distributed across stainless steel (64.4%), alloys (12%), batteries (11.9%), and electroplating (4%), showing clear structural divergence. Stainless steel forms the foundation of nickel demand. In 2026, domestic stainless steel capacity continues to recover, and Indonesian capacity rebounds as quotas are implemented, with the traditional peak season in Q3 providing support. High-temperature alloys and other advanced manufacturing sectors present structural growth opportunities, while traditional demand such as electroplating remains stable. In the power battery sector, LFP is squeezing ternary market share in the short term, but high-end long-range passenger vehicles and energy storage still require high-nickel ternary materials. IEA data shows global NEV sales are projected to reach 23 million units in 2026, with long-term EV fleet growth of 6 times by 2035. Solid-state batteries are expected to gradually enter mass production after 2027, further driving demand for ultra-high-nickel materials and opening long-term growth space for nickel. According to earlier Mysteel data, 2025 global primary nickel supply was 3.79 million tons with a market surplus of 420,000 tons. Assuming Indonesia's actual nickel ore supply reaches 250 million tons with 25 million tons supplemented from the Philippines, 2026 global primary nickel supply is projected to contract to 3.6 million tons, with the surplus narrowing to just 50,000 tons, significantly easing supply pressure.
Sulfur Price Increases Raise Hydrometallurgical Costs and Constrain Supply Release, Periodically Solidifying the Nickel Price Floor; If Sulfur Prices Decline, Hydrometallurgical Enterprise Profitability May Recover
Global sulfur is primarily a byproduct of oil and gas production, with core output concentrated in the Middle East and limited capacity expansion elasticity. Indonesian hydrometallurgical smelting parks rely heavily on Middle Eastern sulfur imports. The ongoing Middle East geopolitical conflicts have persistently disrupted global sulfur circulation, with Indonesian CFR sulfur prices surging significantly. This has weakened the willingness to commission and resume HPAL hydrometallurgical projects while simultaneously raising hydrometallurgical smelting costs, further constraining global nickel intermediate supply growth. Sulfur has now replaced nickel ore as the largest cost component in hydrometallurgical MHP production, with HPAL hydrometallurgical routes facing prominent loss pressures. RKEF pyrometallurgical nickel pig iron consumes less sulfur, only marginally impacted by rising ore prices, energy, and auxiliary material costs, maintaining thin-profit operations. Matte nickel processes have low sulfur requirements, demonstrating strong cost resilience. Rising sulfur prices, combined with Indonesia's new ore price benchmark formula raising nickel ore procurement costs, are creating bottom support for nickel prices through higher smelting production costs. Sulfur prices are expected to struggle returning to historical low ranges, leading to hydrometallurgical nickel cost restructuring. However, as sulfur prices gradually decline, hydrometallurgical enterprise profitability is expected to recover.
Key Industry Chain Companies to Watch
1) Lygend Resources: A leading global nickel trading and Indonesia hydrometallurgical-pyrometallurgical integrated nickel full-industry-chain leader. 2) Huayou Cobalt: Multi-industry chain layout across nickel, cobalt, and lithium, with clear advantages in high-nickel products. 3) GEM: Dual supply through recycling and primary nickel, a core global ternary precursor manufacturer. 4) CNGR Advanced Material: Global precursor leader, securing Indonesian pyrometallurgical nickel raw materials while simultaneously expanding into phosphorus and lithium resources, with diversified materials steadily ramping up.
Risk Warnings: Changes in Indonesian industrial policies; significant nickel price fluctuations; downstream demand falling short of expectations and technological route shifts; substantial increases in prices of key auxiliary materials such as sulfur.