1. Report Industry Investment Rating No relevant information provided. 2. Core Views of the Report - In 2026, the fundamental contradictions in the Shanghai nickel market are accumulating, and the volatility is expected to increase. The static reference range is 95,000 - 130,000 yuan/ton. The overall supply - demand surplus pressure persists. The supply side may experience a path switch. The second - phase expansion of low - cost hydrometallurgical production may impact pyrometallurgical processes, and the traditional nickel - to - ferronickel conversion path may face clearance risks. The pricing of various nickel products is expected to gradually converge, with the lower limit anchored to the full cost of hydrometallurgical production. The upward drive depends on Indonesian policy disturbances [2][107]. - Stainless steel has shifted from a situation of strong supply and weak demand to a situation of weak supply and demand. It may tend to fluctuate at the bottom, with limited downward potential. The increase in hydrometallurgical nickel supply may indirectly increase the pressure on pyrometallurgical production but does not directly replace it in the stainless - steel production line. The cost of the pyrometallurgical path is still the bottom - line anchor for stainless steel, with a reasonable safety margin. The upper limit of the price depends on Indonesian and domestic macro - policies, with a static reference range of 12,000 - 13,200 yuan/ton [2][107]. - In terms of strategies, when facing a weak smelting - end fundamental situation and high uncertainty at the mining end, two approaches can be considered: for short - selling, avoid chasing short positions at low prices, consider short - selling at high prices with option protection to avoid extreme Indonesian risk events; for long - buying, dynamically track the cost of hydrometallurgical nickel, including the prices of by - product cobalt and auxiliary sulfur, to find a good safety margin. For stainless steel, the cost still provides support, and the safety margin is better than that of nickel. In 2026, the overall strategy is to try long positions when the price hits the bottom, but avoid over - chasing high prices without clear policy implementation. Also, pay attention to the opportunity of going long on stainless steel and short on nickel when the nickel - to - steel ratio is high, and consider the possibility of periodic domestic - foreign positive/negative arbitrage [3][108]. 3. Summary by Relevant Catalogs 3.1 2025 Review of Nickel and Stainless - Steel Trends: Volatility Narrowed, and the Market Trended Weakly in Fluctuations - In 2025, the overall volatility of nickel and stainless - steel narrowed, and the oscillation center gradually moved downward. From January to March, they trended strongly, with the highest increases approaching 9% and 6% respectively, driven by mining - end rainy seasons, Indonesian quota approvals, and inventory replenishment by major traders. From April to June, they first declined and then rebounded, shifting from fundamental to macro - logical drivers. From July to November, they trended weakly in fluctuations, with the center gradually moving down due to factors such as inventory build - up expectations and weakening demand [5]. 3.2 The Production Cycle Shifts to Hydrometallurgy, Be Wary of Indonesian Mining - End Risks 3.2.1 The Supply of Refined Nickel and Nickel Sulfate Depends on Front - End Smelting - In 2025, the back - end smelting production cycle entered the second half, and the industrial model change led to structural contradictions in supply and demand. The global refined nickel output from January to October increased by 50,000 tons year - on - year to 900,000 tons, with a cumulative year - on - year growth rate of 6%, mainly contributed by China. The global nickel sulfate output from January to October decreased by 10,000 tons year - on - year to 420,000 tons, with a cumulative year - on - year growth rate of - 2%. However, in mid - 2025, China's supply elasticity was released due to a temporary recovery in new - energy demand [9]. - There were structural contradictions in supply and demand. Intermediate products and nickel sulfate were in short supply, while refined nickel inventories increased significantly. The high inventory and selling pressure of refined nickel squeezed the valuation of Shanghai nickel. The tightness of intermediate products was due to the transformation of the industrial model, with resources integrating towards "integrated" or "equity resource + toll - processing" enterprises [10]. - The supply contradiction is concentrated in the front - end, and the increase depends on hydrometallurgical supply. The planned intermediate product projects from 2026 - 2027 may have a total capacity of over 600,000 tons, with hydrometallurgical projects accounting for 87% of the capacity. It is expected that the production of Indonesian MHP in 2025 and 2026 will increase by 130,000 and 160,000 tons year - on - year to 460,000 and 620,000 tons respectively, and the production of Indonesian oxygen - enriched side - blown ferronickel will increase by 20,000 and 30,000 tons year - on - year to 40,000 and 70,000 tons respectively [17][19]. - The competitiveness of RKEF conversion to ferronickel may continue to weaken. In 2025, the volume of converted ferronickel decreased by 100,000 tons year - on - year to 270,000 tons. In 2026, due to the increasing year - on - year growth of MHP and oxygen - enriched side - blown ferronickel, the supply of converted ferronickel may face more severe challenges [25]. 3.2.2 The Incremental Supply of Ferronickel is Limited, but the Stock Elasticity is Still High - In 2025, the supply of Indonesian ferronickel continued to squeeze the Chinese and overseas markets. The global ferronickel output from January to October increased by 150,000 tons year - on - year to 1.84 million tons, with a cumulative year - on - year growth rate of 9%, mainly contributed by Indonesia. The output of Chinese and other overseas regions decreased by 50,000 tons year - on - year to 380,000 tons, with a cumulative year - on - year growth rate of - 10%. The ferronickel market had a certain inventory build - up, but due to cost support, the price decline was limited [28]. - The expected new production in Indonesia is slowing down, and the incremental supply of ferronickel is limited. In 2026, the growth of Indonesian ferronickel production capacity is expected to slow down from 10% to about 5%. It is expected that the global ferronickel supply in 2026 will increase by 60,000 tons year - on - year to 2.26 million tons, with a year - on - year growth rate of about 3%. The strategy for the ferronickel - stainless - steel line is to try long positions when the price hits the bottom, but avoid over - chasing high prices without clear supply disturbances or policy guidance [31]. 3.2.3 The Contradiction in Indonesian Nickel Mines has High Uncertainty - The contradiction at the mining end and the inventory build - up at the smelting end are in a game, and Indonesian policies still have high uncertainty. The pricing of Indonesian pyrometallurgical nickel mines has adopted a "base price + premium" model since 2023. The decline in LME nickel prices has led to a decrease in the base price, but the premium has increased, offsetting the risk of squeezed profits. The total price of Indonesian pyrometallurgical nickel mines increased slightly, which may lead to a 5% increase in the full - cost center of ferronickel produced by Indonesian self - supplied power plants to about $11,000/metal ton [40]. - From the perspective of policy expectations, Indonesia may take appropriate measures to prevent resource over - supply, such as changing the quota approval from three - year to one - year in 2026. However, Indonesia may not want a sharp increase in nickel prices and may prefer to control quotas to prevent over - supply and moderately boost prices [41]. - The cost of Indonesian hydrometallurgical production is rising steadily, and the high cobalt price supports the economic viability of nickel. The price of hydrometallurgical ore is rising moderately, and the increase in the price of auxiliary sulfur has pushed up the MHP cost. However, the increase in the by - product cobalt price can offset part of the cost, so the negative impact on MHP production economics is limited [51]. 3.3 Demand Contradictions may not be Prominent, and Long - Term Potential Lies in Ternary Materials 3.3.1 The Short - Term Growth of Ternary Material Demand is Moderate, and More Long - Term Potential is Expected - The positive and negative impacts of the increase in electric vehicle penetration rate and the decline in the structural proportion of ternary batteries offset each other, resulting in a weak growth pattern for ternary materials. In 2025, the global electric vehicle demand increased by over 20%, while the global ternary battery output increased by only over 10% year - on - year, and the inventory pressure in the industrial chain decreased [53]. - In 2026, the "positive total" and "negative structure" drivers of new - energy demand for nickel will both weaken, but still offset each other to some extent. The global electric vehicle demand growth rate may decline, and the ternary market share may still face pressure. However, the negative impact of inventory reduction on upstream demand is weakening, and the elasticity of demand during seasonal peak replenishment is increasing [53]. - Future potential depends on emerging demands such as solid - state batteries, robots, and low - altitude economy. 2027 may be an important turning point for demand. If the investment in solid - state batteries meets expectations, the ternary material demand may still grow weakly in 2026 but may turn around in 2027 [54]. 3.3.2 The Incremental Demand for Alloys is Limited, and the Raw - Material Structure is Changing - The growth rate of alloy demand is expected to be limited, and attention should be paid to the marginal changes in high - temperature and corrosion - resistant alloys. The overall growth rate of alloy demand has been declining year by year. The demand for corrosion - resistant alloys is under pressure due to factors such as the slowdown in the expansion of LNG receiving stations and the decline in LNG shipping orders. The demand for high - temperature alloys is more resilient, but the orders may be concentrated in leading enterprises [69]. - The price difference between ferronickel and refined nickel may converge in the long run. Some alloy special - steel enterprises may adjust their raw - material structure by using more ferronickel to replace refined nickel, which may intensify the supply - demand mismatch of refined nickel and also provides a new perspective on whether the conversion of ferronickel to ferronickel will be phased out in the long run [70][71]. 3.3.3 The Demand Elasticity of Stainless Steel is Low, and the Supply Rhythm Affects Nickel Consumption - The demand for stainless steel is growing weakly. The demand elasticity is low, and it is difficult to have unexpected performance. From 2020 - 2025, the year - on - year growth rate of apparent demand decreased marginally, mainly affected by factors such as the slowdown in terminal manufacturing investment, the drag of the real - estate post - cycle sector, and overseas trade barriers [89]. - The stainless - steel market has shifted from strong supply and weak demand to weak supply and demand, and the bottom - grinding market may be repeated. In 2025, the stainless - steel market was in a "bottom - seeking" process, and the supply growth rate decreased from over 8% to 3.2%. In 2026, if the stainless - steel market remains undervalued, the excess pressure is unlikely to increase. The strategy for stainless steel in 2026 is to try long positions at low prices, and the upward potential depends on external policy drivers [94][95]. 3.4 Supply - Demand Balance and Outlook 3.4.1 Supply - Demand Balance Sheet - From a static balance perspective, in 2026, the surplus contradiction in the nickel smelting end still exists. The supply side may increase by 80,000 tons year - on - year to 3.86 million tons, and the demand side may increase by 80,000 tons year - on - year to 3.63 million tons, with a surplus of 240,000 tons. The increase in low - cost supply may lower the clearing line for nickel prices, but the upward potential also depends on Indonesian mining - end policies [101]. - Dynamically, there are uncertainties about whether the inventory build - up in 2026 will be as expected, including the impact of Indonesian mining - end policies, the speed of the clearing process, the impact of macro - policies, and the possibility of hidden inventory replenishment [103]. 3.4.2 Conclusion - The fundamental contradictions in the Shanghai nickel market are accumulating, with increased volatility expected in 2026. The static reference range is 95,000 - 130,000 yuan/ton. Stainless steel has shifted to a weak supply - demand pattern, with a static reference range of 12,000 - 13,200 yuan/ton [107]. - The strategies include avoiding short - selling at low prices, considering short - selling at high prices with option protection, dynamically tracking the cost of hydrometallurgical nickel for long - buying, and paying attention to the opportunity of long - stainless steel and short - nickel when the nickel - to - steel ratio is high, as well as periodic domestic - foreign positive/negative arbitrage [108]. - In 2026, the front - end smelting may enter a second peak of low - cost replacement of high - cost production. The pyrometallurgical path still has pressure but also provides a certain safety margin. The static balance is still challenged by Indonesian policies, and the long - term outlook is promising, with 2027 possibly being an important turning point [109][110].