Production Line Resumes Production and Launches! Inner Mongolia Qinjin New Materials Completes Stainless Steel Entire Industry Chain On August 6, good news came from the Naiman Banner Industrial Park: the stainless steel hot-rolling and pickling production line of Inner Mongolia Qinjin New Materials Group successfully completed commissioning and officially resumed production and launched, with the first batch of qualified stainless steel hot-rolled pickled coils successfully rolling off the line. The successful launch of this production line marks that the Qinjin Group's "ferroalloy—stainless steel smelting—hot rolling—annealing—pickling" integrated stainless steel entire industry chain system is fully ready for production and operation. It is reported that Inner Mongolia Qinjin New Materials Group Co., Ltd. was established in April 2017, is affiliated with Hebei Bishi Group, and is located in the Naiman Banner Nickel-based Circular Economy Industrial Park. The enterprise deeply cultivates the green and low-carbon new materials field, leveraging regional clean energy advantages, and has laid out and constructed a series of production lines including nickel-iron alloy, SiMn alloy, high-carbon ferrochrome, stainless steel smelting, hot rolling, pickling, etc., building a closed-loop, complete, green, and efficient nickel-based new materials entire industry chain production system. This key project covers a total area of nearly 10,000 mu, with an estimated total investment of 21 billion yuan, demonstrating prominent industrial scale and development potential. Upon full production, the project is expected to achieve an annual total industrial output value of 70 billion yuan, generate annual tax revenue of 3.5 billion yuan, and directly create jobs for more than 15,000 people. Leveraging the cost advantages, technology advantages, and industrial radiation advantages brought by the entire industry chain integration, it boosts the collaborative development of related industries such as stainless steel deep processing, supporting processing, logistics transportation, and equipment operation and maintenance, helping the Naiman Banner stainless steel industrial cluster to accelerate quality improvement, capacity expansion and upgrade, and enter the fast lane of high-quality development.

High ore costs, tight spot availability and weak stainless demand pin China's benchmark NPI index inside a RMB 7/nickel-point range in July, before an Indonesian policy jolt lifts it to a monthly high of RMB 1,129.5.

In its official H1 2026 release, PT Trimegah Bangun Persada (Harita Nickel, IDX: NCKL) said its Rp17.1tn revenue was supported by operational discipline and capacity optimization amid a still-challenging global nickel market. CFO Suparsin Darmo Liwan said nickel ore sales volumes rose YoY, helped by the new PT Gane Tambang Sentosa (GTS) mine running since Q3 2025 and added lines at the KPS pyrometallurgy plant. Ferronickel sales rose notably on higher KPS RKEF output, while HPAL (MHP) sales were stable, shaped by delivery scheduling. Harita is also building a 50 MW HPAL waste-heat plant (Q4 2026) and a 40 MW solar plant (99% built).

Background: Pangkalpinang Case Triggered Wider REE Scrutiny Indonesia’s recent rare earth element (REE), or Logam Tanah Jarang (LTJ) , inspection issue appears to have been triggered by stricter government scrutiny following the Pangkalpinang case. The initial case was linked to alleged irregularities involving around 390 tonnes of REE-containing material and involved PT Putraprima Mineral Mandiri, PT Sucofindo, and the Pangkalpinang Customs office. This raised a broader regulatory question: when a mining product contains rare earth elements or radioactive elements as associated content, should it still be treated as its main export product, or should it fall under rare-earth-related export restrictions? This issue quickly affected Indonesia’s wider mineral export chain. Products such as NPI, ferronickel, MHP, alumina, and tin-related products are not exported as rare earth products. However, they may contain trace amounts of associated REE or radioactive elements. As a result, surveyors and customs became more cautious, causing delays in LS issuance and customs clearance for some cargoes. For the nickel industry, the issue became an immediate concern because both NPI/ferronickel and MHP exports were affected by additional testing requirements. Market feedback indicated that some cargoes were temporarily stuck, and the disruption was not limited to one company. Some traders also reported that QMB-related cargoes could not be shipped smoothly during the disruption period. Why REE Matters: Indonesia Moves to Protect Critical Mineral Value Before Export REE matters because rare earth elements are strategic materials used in high-value industries such as electric vehicles, permanent magnets, electronics, renewable energy, and defense-related materials. For Indonesia, the issue is not only about export clearance, but also about resource-value control. The government is increasingly focused on identifying and protecting critical mineral value before it leaves the country. The challenge is that REE often appears not as a standalone product, but as an associated or trace element in other mineral products. If every product containing small REE content is treated as a restricted rare earth export, normal mineral shipments could be delayed. However, if REE content is not monitored at all, Indonesia may lose control over strategic mineral value. The 17 rare earth elements generally include lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, yttrium, and scandium . In the recent market discussion, testing was understood to cover these 17 REE elements, while radioactive elements such as thorium and uranium also became part of the inspection concern. The problem is that rare earth elements are often not produced as standalone products. They can appear as associated elements in other mining products. This creates a regulatory grey area. If every exported product containing trace REE must be treated as a rare earth export, then many normal mineral shipments could be delayed. But if associated REE content is not checked at all, Indonesia risks losing control over strategic mineral value. Therefore, the market concern is not only whether nickel exports are blocked. The larger concern is whether Indonesia is entering a new phase where exports of mineral products require more detailed chemical-content verification. What Happened in the Market: LS Delays and Additional Testing Disrupted Mineral Shipments According to SMM’s market understanding, the recent inspection requirement temporarily affected exports of several Indonesian processed mineral products. For nickel products, the impact was mainly reflected in three areas. LS issuance slowed down. The LS report is a key export document, so delays directly affected customs clearance and shipment release. According to SMM’s understanding on July 24, it is reported that around 102 surveyor reports were delayed due to differences in interpretation regarding REE checks during export verification. Some cargoes were temporarily stuck at ports. Market participants reported delays in NPI and MHP shipments, while some traders also mentioned that QMB-related cargoes faced similar obstacles. Exporters had to organize additional testing. The government required checks on 17 REE elements and radioactive elements in certain products. Some companies were still waiting for test results or clarification from surveyors and customs. Therefore, this was not a direct export ban on nickel products. It was mainly a temporary administrative and testing bottleneck caused by unclear implementation standards for associated REE and radioactive elements. Impact on the Nickel Market: NPI and other Nickel Product Exports Affected Mainly Through Shipment Delays For the NPI and ferronickel market, the short-term impact was mainly reflected in shipment timing rather than production. Some port-side cargoes were delayed because LS reports and customs clearance were affected. According to SMM’s latest market understanding, LS reports are currently being issued in batches, and some high-grade NPI cargoes at ports have started to be released. As the current disruption mainly occurred during the export documentation and clearance process, the direct impact on NPI production was limited. If LS issuance and customs clearance continue to normalize, the impact on the overall NPI market is expected to remain limited. At this stage, the issue is more related to temporary export procedure disruption rather than a confirmed structural restriction on NPI exports. For the MHP market, some shipments were also affected by the REE-related inspection requirement. According to market feedback, certain MHP cargoes, were temporarily unable to be shipped smoothly during the disruption period. Similar to NPI, the key issue was mainly related to LS issuance, testing requirements, and customs clearance rather than a direct restriction on MHP production. The government’s latest coordination result clarified that export procedures should refer to the main mining product and its derivatives, rather than automatically treating associated REE or radioactive elements as the basis for export restriction. Market Feedback and Industry Concerns: Lack of Technical Standards Created Uncertainty for Exporters Market feedback shows that the REE-related inspection requirement has created practical disruption for Indonesia’s mineral export chain. According to FINI Chairman Arif Perdanakusumah, at least 120 commodity vessels were unable to sail or leave ports due to the requirement to test rare earth element content. He noted that the situation caused losses not only for companies, but also for the government, mainly because there was still no clear regulation providing technical guidance on REE content limits. Industry associations generally understand that the policy is part of the government’s effort to improve mineral governance. However, they also emphasized that the technical implementation needs to be reviewed, especially because many mining products contain REE only as associated or trace elements rather than as the main product. This distinction is important for commodities such as nickel, bauxite, tin, and copper, where companies are licensed and designed to produce the main commodity, while REE content may naturally appear as a by-product or associated element. The bauxite industry also raised similar concerns. ABI Chairman Ronald Sulistyanto stated that the REE issue should be returned to its core technical framework and handled by the Ministry of Energy and Mineral Resources, as the ministry has the relevant mining and mineral expertise. He stressed that the key question is whether REE is the main product or only an associated element. If it is the main product, then specific export restrictions may apply. However, if it is only an associated element, the issue requires more detailed technical clarification rather than broad export disruption. IMA Executive Director Sari Esayanti also highlighted that most mining companies are currently oriented toward their main licensed commodity and existing processing design. In many commodities such as tin, bauxite, nickel, and copper, REE generally appears as an associated element. She also noted that most mining companies do not yet have sufficient facilities or technology to identify, separate, or economically utilize REE elements. As a result, new interpretations around REE reporting or export obligations have created uncertainty for business players. From the industry’s perspective, the most urgent requirement is technical certainty. Companies need clearer parameters, testing methodology, and reporting mechanisms so that all exporters, surveyors, and customs authorities apply the same standard. Without consistent technical guidance, similar shipment delays could occur again even if the current bottleneck is gradually resolved. Government Update and Resolution The most important update came from the Indonesian government coordination letter dated July 31, 2026. According to the letter, Indonesia’s Coordinating Ministry for Economic Affairs held a coordination meeting on July 30 to discuss export obstacles related to REE and/or radioactive content in mining products and derivatives. Key points from the government coordination result: Exports should continue to follow existing trade regulations , including Minister of Trade Regulation No. 23/2023 on export policies and arrangements, and Minister of Trade Regulation No. 22/2023 on prohibited export goods, as amended by later regulations. The regulation should apply to the main mining product and its derivatives, not automatically to associated elements contained in those products. This is the most important clarification for NPI, ferronickel, MHP, alumina, and other processed mineral products. Products containing radioactive elements may still be exported if the content is classified as Naturally Occurring Radioactive Material, or NORM. This helps reduce the risk that trace radioactive content automatically blocks exports. Exporters, surveyors, and customs should refer to the main product classification when processing exports. This provides a basis for LS issuance and customs clearance to gradually resume. A Legal Opinion from the Attorney General’s Office will be prepared in parallel to support the regulatory clarification. The government plans to accelerate revisions to Minister of Trade Regulation No. 23/2023, Minister of Trade Regulation No. 22/2023, and Minister of ESDM Regulation No. 25/2018. Discussions are expected to start on August 3, 2026, with completion targeted within around one week. SMM View: Short-Term Export Disruption, but a Longer-Term Signal of Stricter Mineral Supervision SMM believes the REE inspection issue is a short-term disruption, but also an important policy signal. In the short term, the impact on NPI and MHP exports should gradually ease as LS reports are issued and customs interpretation becomes clearer. If cargo clearance continues to normalize, the impact on overall nickel supply-demand balance should remain limited. However, the event shows that Indonesia is strengthening supervision over critical mineral content, export documentation, and resource-value protection. Even after the current disruption is resolved, exporters may face stricter testing, clearer reporting requirements, and closer coordination among surveyors, customs, ESDM, the Ministry of Trade, and other agencies. Going forward, the market should monitor: Whether all delayed LS reports can be fully cleared. Whether future shipments will require full REE and radioactive-content testing. Whether the government will set clear thresholds for REE, thorium, uranium, and NORM classification. Whether the revised regulations clearly distinguish main export products from associated trace elements. Whether NPI, ferronickel, MHP, alumina, and tin-related products will face different implementation standards. Overall, this event should not be interpreted as a direct ban on NPI or MHP exports. It is more accurately a regulatory clarification process triggered by Indonesia’s stronger focus on rare earth and radioactive element content in mineral products. If implementation becomes clear quickly, the impact will remain temporary. If rules remain vague, shipment delays and administrative friction could reappear.

Anglo American reported second-quarter nickel production of 9,100 tonnes, down 4% year on year and flat against Q1 2026, taking H1 output to 18,200 tonnes, 6% below the same period of 2025. The decline reflects planned maintenance at its Brazilian ferronickel operations Barro Alto and Codemin that was brought forward from later in 2026; Barro Alto produced 7,300 tonnes in the quarter at a processed grade of 1.47% Ni. The company expects output at both plants to rise gradually from Q3 and left full-year production and unit cost guidance unchanged. Anglo is still awaiting European Commission antitrust clearance for the sale of the nickel business to MMG Singapore Resources, agreed earlier. Non-Indonesian ferronickel supply continues to contract at the margin.

Tariffs, certification regimes and quotas, not demand, have redrawn Indonesia's 4.7 million-mt export map since 2021: China's share has halved, India has quadrupled, and Europe's door has narrowed to a slab-shaped hole.

China’s NPI prices have remained firm despite falling production costs because freely available inventories have tightened. FeNi, meanwhile, has followed lower benchmark nickel prices and faced competition from cheaper refined nickel, compressing its premium over NPI. The divergence could reverse as Chinese output rises and Indonesian producers switch capacity back to NPI.

Overseas rare earth markets diverged this week between light and heavy types. Driven by the uptrend in China, terbium oxide and terbium metal prices rose, while light rare earths remained stable. Trading-wise, heavy rare earths saw few transactions due to export controls. On the industrial front, U.S. companies accelerated domestic recycling and purification, while European and Japanese firms advanced R&D on magnetic material recycling and rare-earth-free alternative technologies. Meanwhile, Indo-Pacific and South Korean players actively restructured supply chains, and resource development and processing projects were intensively launched in locations such as Malaysia, Thailand, and Brazil. The global “de-risking” layout for rare earths continued to deepen.

The global nickel and stainless steel markets remain focused on Indonesia's July RKAB quota revision window, with several Indonesian mining companies having submitted applications for increased allocations. The outcome remains uncertain: approval would help ease nickel ore supply constraints, while a slower-than-expected review process could disrupt ferronickel and stainless steel supply chains. High inventory levels continue to suppress market performance, with spot transactions staying sluggish and end-user demand remaining weak. With the quota review outcome still unclear, elevated inventories, and soft demand converging, the nickel and stainless steel markets are likely to maintain a cautious wait-and-see tone in the near term, with the trajectory hinging on Indonesia's quota policy direction and shifts in supply-demand fundamentals.

I. Key Points In H1 2026, nickel prices exhibited wide fluctuations characterized by a “rebound from lows—consolidation at highs—pullback and consolidation” pattern. The most-traded LME nickel contract surged from $14,000/mt at the beginning of the year to near $20,000 in May, before pulling back to $16,000-17,000 in July; the most-traded SHFE nickel contract climbed from 110,000 yuan/mt to above 150,000 yuan/mt, and then retreated to 125,000-130,000 yuan/mt. The driving logic of this market move was the intertwined resonance of three main themes: a shift in Indonesia’s resource policies, repeated fluctuations in global macro liquidity expectations, and the impact of geopolitical conflicts on raw material costs. The center of nickel prices did rise compared to 2025, but the “shadow of surplus” has not dissipated. In H2 2026, the key variables for tracking nickel prices are as follows: First, the approval results of Indonesia’s RKAB quota revision in July. A significant increase in the quota would substantially narrow the supply deficit and weigh on nickel prices. Second, the Fed’s policy path — whether the hawkish signal from the June dot plot will persist — which affects the US dollar index and the valuation center of commodities. Third, sulphur supply and the situation in the Strait of Hormuz, which determines the cost support strength along the MHP–nickel sulphate–refined nickel chain. Fourth, demand from stainless steel and NEV ternary power batteries. Fifth, the pace of global visible inventory destocking. Sustained destocking would serve as a real support signal, while high inventories would limit price elasticity. Under a neutral scenario, LME nickel prices are expected to trade in the range of $15,500-17,500/mt in H2. II. Macro Environment – Reversal of Liquidity Expectations, Substantial Impact of Geopolitical Costs, and the ‘Dual Strength’ Pattern of the RMB 1. Fed Policy Path: ‘From Dovish to Hawkish’ At the beginning of the year, the market widely expected 50-100 bp of rate cuts in H1 2026, and the US dollar index fell below 97 at one point, creating a relatively loose liquidity environment. However, mid-year, new Fed Chair Kevin Warsh’s hawkish stance surprised the market. The June meeting kept rates unchanged and the dot plot signaled a bias toward rate hikes, leading to a systematic revision of the previously priced “dovish delivery” logic. This directly weighed on the valuation of industrial metals such as nickel, serving as a key macro trigger for the nickel price decline in June. 2. Geopolitical Conflicts Expanded from ‘Safe-Haven Trades’ to ‘Real Cost Shocks’ The Middle East situation (tensions among the US, Israel and Iran, and disturbances in the Strait of Hormuz) not only pushed up energy and safe-haven premiums, but also, through the critical link of sulphur supply, directly raised the production cost of Indonesia’s MHP (each mt of MHP in metal content consumes about 10 mt of sulphur), forming the core driver of the pulse-like surge in nickel prices in May. After a ceasefire agreement was reached between the US and Iran in mid-June, energy and safe-haven premiums receded, leading to a peak and subsequent pullback in commodities, confirming the dual impact of geopolitical variables on nickel prices. 3. China’s Macroeconomy and RMB ‘Dual Strength’ Provide a Unique Offset Against a generally stronger US dollar, the onshore RMB bucked the trend, appreciating from 6.98 to 6.79 (a gain of about 2.9%). The relative strength of the RMB, with the exchange rate declining (USD/CNY fell), caused import costs to drop sharply, opening the import window and generating arbitrage profits. However, as large volumes of imported nickel flowed into the domestic market, the spot supply of nickel plates in China increased, accelerating the pace of inventory buildup and weighing on domestic prices. At the same time, LME nickel inventories decreased, leading to a repair of the SHFE/LME nickel price ratio, and the import window closed again in May. III. Indonesia's Industrial Policy—Systemic Transformation from "Expanding Capacity" to "Controlling the Chain to Raise Prices" In H1 2026, Indonesia's nickel industry policy completed a strategic shift, systematically deploying a policy package centered on "controlling supply, stabilizing prices, and enhancing resource added value," which became the core fundamental variable driving wide fluctuations in nickel prices. 1. Significant tightening of total RKAB quotas and tilted allocation structure At the beginning of the year, Indonesia's ESDM announced that the 2026 nickel ore quota would be drastically cut from 379 million wmt in 2025 to 270 million wmt. The world's largest single nickel mine project, WBN, saw its 2026 quota suffer a "cliff-like" reduction; its quota was exhausted in May, leading to full-scale production cuts and shutdowns, stoking persistent concerns over tight supply in H1. The Indonesian authorities have clarified that July 1 to 31, 2026 will be the mid-year application period for supplementary RKAB quotas, prioritizing compliant miners with integrated domestic downstream smelting capacity (such as supporting NPI or HPAL projects). The mid-year policy game over RKAB quotas is intensifying. 2. HPM pricing formula reform shifts from single nickel pricing to multi-element comprehensive pricing The new formula effective April 15 incorporates associated elements such as iron, cobalt, and chromium into the value component for the first time. Indonesia sought to recapture the undervalued value of associated resources into the pricing system, raising benchmark prices for nickel ore and intermediate products across the cost side. However, this reform met strong opposition from the domestic smelting industry, which argued that it would further squeeze smelting profits amid already surging sulfur and energy costs. 3. Indonesian government officially releases new export control regulations for ferronickel (FeNi) and NPI In July, Indonesia further strengthened export supervision of high-value-added nickel products under Finance Minister Regulation (KMK) No.32/MK/BC/2026 (implementing Trade Minister Regulation No.17/2026). The new regulation targets products under HS Code Ex.7202.60.00, including ferronickel (FeNi) ingots and lumps with nickel content ≥8%, sponge ferronickel (Sponge FeNi) and granular ferronickel (Nugget FeNi) with nickel content ≥4%, as well as low-grade ferronickel products with 2% ≤ Ni <4% and iron content ≥75% (covering some NPI products). Export requires a surveyor's report (LS) and relevant export licenses; from January 1, 2027, export will generally only be allowed through state-owned export enterprises (BUMN Ekspor), with exemptions under specific circumstances. Overall, Indonesia is currently tightening quotas, raising taxes and fees, and imposing export controls to elevate resource value, seeking to keep nickel prices within its officially recognized desired range ($19,000-20,000/mt) over the long term. On the other hand, it must balance stability of the industry chain and foreign investor confidence in actual implementation, thus exhibiting a game-like characteristic of "tight first then loose, adjusting while implementing."The extreme policy uncertainty was one of the core reasons behind the wide fluctuations in nickel prices in H1. IV. Changes in Nickel Intermediate Product Raw Materials: Restructuring of the Cost Transmission Chain 1. MHP and High-Grade Nickel Matte: A Dynamic Game Dominated by "Auxiliary Material Costs" There are three main production routes for nickel sulphate raw materials: MHP (hydrometallurgy): the dominant route with the largest long-term growth, but highly dependent on sulphur; high-grade nickel matte (pyrometallurgy RKEF conversion / oxygen-enriched side-blowing route): an alternative route with low dependence on sulphur and relatively stable cost elasticity; nickel briquette dissolution: the least economical, feasible only within specific price spread windows. The sharp fluctuations in sulphur prices in H1 reshaped the cost structure of the entire nickel industry chain. Producing one mt in metal content of MHP requires approximately 10 mt of sulphur, while tensions in the Strait of Hormuz disrupted Indonesia’s sulphur import channels, forcing Huayou Cobalt’s Huafei Nickel-Cobalt to cut production on some lines starting in May. Sulphur prices surged, with the SMM sulphur CIF Indonesia price peaking at $1,300/mt, and the cost shock was transmitted step by step along the “sulphur—MHP—nickel sulphate—electrodeposited nickel” chain, becoming one of the core drivers behind the rapid nickel price rise in May. The high-grade nickel matte route, relying on pyrometallurgy, is far less dependent on sulphur than MHP. Consequently, during the sulphur price spike, high-grade nickel matte’s cost advantage over MHP widened significantly, creating direct substitution pressure on MHP’s market share. In terms of production trends, Indonesia’s MHP production edged up about 0.02% YoY to 206,000 mt in metal content in January-June 2026. Over the same period, high-grade nickel matte posted the most impressive growth, with production up about 123% YoY to 185,000 mt in metal content, strengthening its position in the competition for nickel sulphate raw materials. In the medium and long term, however, once sulphur supply normalizes and MHP costs pull back, the MHP route, with its scale effects and relatively mature cost curve, will reclaim its dominant share of the nickel sulphate raw material market; after all, MHP projects’ capacity base is far larger than that of high-grade nickel matte, and its cobalt by-product also provides a substantial marginal revenue contribution (about $4,500/mt Ni). 2. Production Capacity Switching Game Between High-Grade Nickel Matte and NPI High-grade nickel matte and NPI share the same RKEF production lines and laterite nickel ore resources, differing only in whether a sulphidation conversion stage is added at the end. The conversion decision is essentially a profit-maximization problem: when the marginal revenue of high-grade nickel matte relative to NPI covers the additional equipment and process losses of sulphidation conversion, lines switch to high-grade nickel matte; otherwise, they tend toward NPI. The conversion profit chart shows that profit for NPI-to-high-grade-nickel-matte conversion appeared only in April-May. After MHP production cuts in May, the monthly nickel sulphate raw material deficit was about 8,000 mt Ni, theoretically requiring increased high-grade nickel matte production to fill. However, due to RKAB quota constraints and the continued decline in NPI feed grade, integrated enterprises prioritized supplying stainless steel, making it difficult for high-grade nickel matte to offset the MHP raw material shortfall. This was a key reason why nickel sulphate prices remained firm even after refined nickel prices fell sharply in May. 5. Refined Nickel Supply-Demand Pattern: High Inventory vs. Structural Tightness Expectations 1. Supply Side: Electrodeposited Nickel Capacity Continues to Expand, Production Hits Repeated Records The most certain trend on the supply side is the sustained release of electrodeposited nickel capacity and production in China and Indonesia. According to SMM data, from January to June 2026, China’s refined nickel production was 215,000 mt, a YoY growth rate of 9%; Indonesia’s refined nickel production was 56,000 mt, a YoY growth rate of 97%. Meanwhile, at the beginning of 2026, China’s refined nickel trade pattern underwent a temporary reversal. Previously, benefiting from the explosion in electrodeposited nickel capacity, China had once been expanding its net exports of refined nickel. However, entering Q1 2026, as the price spread between Chinese and overseas markets opened up and the import arbitrage window was activated, China turned back into a net importer of refined nickel, with net imports exceeding 80,000 mt in January-April. 2. Demand Side: New Energy Recovery, Stainless Steel Support, and Steady Alloy & Special Steel In H1 2026, stainless steel, the largest downstream application of nickel, maintained mild growth. Total stainless steel production in China and Indonesia from January to June was approximately 23 million mt, up about 2% YoY. Steel mills maintained relatively high operating rates throughout H1, with stable apparent consumption. In the new energy (ternary battery) sector, nickel demand saw a strong recovery. From January to June, China’s ternary cathode precursor production was 528,000 mt, up 32% YoY; ternary cathode material production was 493,000 mt, up 40% YoY. Alloy & special steel and electroplating, although accounting for a relatively low share of total primary nickel consumption, played a critical role in refined nickel demand in H1 due to their irreplaceability. From January to June, China’s total refined nickel demand was approximately 140,000 mt, up 9% YoY. Military and aerospace demand strengthened, while high-end manufacturing demand remained steady with moderate growth. 3. Inventory Side: Global Visible Inventory Remains at Historical Highs Despite wild swings in nickel prices in H1, global visible nickel inventory remained at relatively high historical levels. LME nickel inventory fluctuated in the range of 270,000-280,000 mt for an extended period. China’s social inventory and exchange warrants experienced significant buildup. As of July, SMM refined nickel social inventory reached 130,000 mt, with total global inventory hitting a high of 497,000 mt. High visible inventory posed a significant constraint on nickel price rises. In June, after digesting supply disruption narratives, the market refocused on the fundamental reality of “high inventory and lackluster demand,” and nickel prices pulled back from a temporary high to around $16,100/mt. 6. H2 2026 Risk Alerts and Nickel Price Forecasts Based on the logic of H1, nickel price trends in H2 are expected to maintain a fundamental pattern dominated by policy gaming, with macro factors amplifying volatility. The following variables merit close monitoring: 1. The final outcome of the RKAB quota revision approval in Indonesia in July; 2. whether the US Fed's policy path in H2 will continue its hawkish stance; 3. whether sulfur supply can substantially return to normal, and whether there is a risk of repeated disruptions in the Strait of Hormuz situation; 4. whether end-use demand from stainless steel and new energy sectors can show a substantial improvement; 5. the destocking pace of global visible inventory. Based on the above price influencing factors, a scenario analysis for nickel prices is conducted: Bearish scenario (quotas being more accommodative than expected): quota increase ≥30% + sulfur pullback + high inventory pressure → LME nickel $14,000—$16,000/mt. Neutral scenario (highest probability): quota slightly increased but still tight + sulfur consolidates at highs → LME nickel $15,500—$17,500/mt. Bullish scenario (tight quotas + secondary cost surge): quotas continue to tighten + export controls + repeated geopolitical tensions push up sulfur → LME nickel $17,000—$19,000/mt.