Nickel stands out as one of the few base metals that has missed out on the bull market witnessed in the sector since 2024. As of January 5, 2026, nickel prices have risen by a mere 3% since the start of 2024, a performance that significantly lags behind the gains seen in precious metals, industrial metals like copper, aluminum, and zinc, as well as energy metals such as cobalt and lithium carbonate. Should policy changes in Indonesia create a supply-demand gap for the metal, there exists a possibility for a high-volatility, catch-up rally. If nickel prices successfully reverse their trend, it is advisable to focus on companies with mature hydrometallurgical technologies and the potential for significant profit releases, such as LYGEND RESOURCE (02245) and Huayou Cobalt (603799.SH). The main views of China Post Securities are as follows.
On the supply side, Indonesia's role continues to strengthen. In terms of reserves, Indonesia holds 55 million tonnes of nickel reserves, accounting for 42% of the global total, making it the world's most significant nickel reserve holder. Brazil and Australia have reserves of 16 million and 24 million tonnes, representing 12% and 18% shares, respectively. Regarding annual production, global nickel output reached 3.52 million tonnes in 2024, a year-on-year increase of 4.7%. According to INSG projections, global production is expected to be 3.81 million tonnes in 2025, growing by 8.2% year-on-year. Indonesia's nickel production was 2.2 million tonnes in 2024, constituting approximately 60% of global output. With a further expected increase in its production in 2025, its share is projected to rise to 67%, underscoring its pivotal role in global nickel supply.
Analyzing nickel smelting in Indonesia reveals two primary routes: the limonite route used for the High-Pressure Acid Leach (HPAL) hydrometallurgical process, and the saprolite route utilized in pyrometallurgical processes like RKEF and oxygen-enriched side-blown furnaces. Currently, the hydrometallurgical process demonstrates robust profitability after cost deductions, largely due to favorable cobalt prices. In contrast, the pyrometallurgical process is constrained by high nickel ore prices and weak prices for its downstream product, nickel pig iron, leaving most producers operating near breakeven points.
Demand for nickel remains driven by both stainless steel and ternary batteries, though the growth rate for the latter has moderated. In the projected demand structure for 2025, stainless steel demand is estimated at around 2.3 million tonnes, accounting for 65% of the total. Demand from ternary batteries is growing at approximately 7% annually, with full-year demand expected to be about 480,000 tonnes, representing a 14% share. Demand for nickel alloys and other uses remains relatively stable, comprising 14% and 7% shares, respectively. Global production of stainless steel crude steel has shown steady growth in recent years, reaching 62.62 million tonnes in 2024, a year-on-year increase of over 7%, following production of 58.45 million tonnes in 2023, which grew by 5.78% year-on-year. Downstream demand for stainless steel is relatively stable, with a lower correlation to real estate and infrastructure, which account for only about 12% of demand. The primary downstream sectors are manufacturing-related, which has supported a high growth rate from 2022 to 2025.
Demand from ternary batteries has fallen short of market expectations, primarily due to competition from vehicles using lithium iron phosphate batteries. Although sales of new energy vehicles grew by 27% from January to November 2025, the shipment growth rate for ternary materials was only about 7%, reflecting structural changes within the new energy vehicle market.
Recent policies introduced by the Indonesian government have become a significant variable affecting supply, potentially altering the market balance. The government has intensively rolled out new mining management regulations, further tightening oversight and control over mineral resource development, particularly for strategic minerals like nickel, thereby reversing previous expectations of a looser nickel market. Based on supply-demand balance projections, demand from stainless steel and ternary batteries is expected to maintain some growth, with overall demand growth rates estimated at 4.2% in 2026 and 3.8% in 2027. If Indonesia's policy restricting quotas to 250 million tonnes is implemented, nickel supply could contract by approximately 8% in 2026, potentially leading to a market shortage of around 100,000 tonnes.
Risks include potential unexpected changes in Indonesian policies and weaker-than-anticipated downstream demand.
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