Core Viewpoint - In January 2026, China's electric nickel production reached 34,700 tons, marking a year-on-year increase of 10.5% and a month-on-month increase of 29.7%, driven by recovery from production cuts, improved nickel prices, and increased operational rates for the new year [1] Group 1: Electric Nickel Production - China's electric nickel production in January 2026 was 34,700 tons, a 10.5% increase year-on-year and a 29.7% increase month-on-month [1] - The recovery in production is attributed to three main factors: the gradual resumption of production by companies that faced raw material issues in Q4 2025, improved profit margins due to rising nickel prices, and an overall increase in operational rates to achieve a strong start for the new year [1] Group 2: NPI Production - In January 2026, China's NPI (Nickel Pig Iron) production was 21,400 tons, remaining stable month-on-month but showing a 3.6% decrease year-on-year [4] - High nickel iron production was 15,000 tons, reflecting a month-on-month decrease of 5.7% and a year-on-year decrease of 13.8%, while low nickel iron production increased by 16.4% month-on-month and 33.3% year-on-year to 6,400 tons [4] - NPI production is expected to decrease by 6.54% month-on-month in February 2026 to around 20,000 tons [4] Group 3: Battery-grade Nickel Sulfate Production - In January 2026, the production of battery-grade nickel sulfate was 35,000 tons, representing a month-on-month increase of 9.4% and a year-on-year increase of 11.5% [4] - The production of primary raw material products was 32,000 tons, with a month-on-month increase of 8% and a year-on-year increase of 10.8%, accounting for approximately 92.8% of the total [4] - Due to the "export rush" and pre-holiday stockpiling, the demand for nickel sulfate from the ternary industry chain significantly increased [4] - In February, production is expected to decline to around 32,000 tons due to holiday-related reductions in effective working days and prior demand being concentrated [4]

Report Industry Investment Rating - Not provided Core View of the Report - The negative feedback in the industrial chain has not ended [4] Summary by Relevant Catalogs Nickel Situation and Policy Changes - On June 10, Indonesia's Energy Minister Bahlil Lahadalia announced the revocation of the mining licenses of four nickel companies in Raja Ampat, Papua, due to environmental concerns [3] - On July 2, 2025, Indonesia's Mining Minister Bahlil Lahadalia said Indonesia plans to shorten the mining quota period from three years to one year to improve industry governance and control coal and ore supplies, which is expected to support prices and increase government revenue [4] Negative Feedback Reaching the Mine End - From the perspective of industrial profit distribution, mine - end profits are still substantial. With mine supply at a seasonal peak, there is room for mine prices to fall [6] - As of July 4, the premium of Indonesian pyrometallurgical ore was $25/wet ton, a week - on - week decrease of $2/wet ton. Due to losses in the NPI - stainless steel industry chain, pyrometallurgical ore prices are under pressure. Hydrometallurgical ore prices are relatively stable as MHP still has profits and the Qingshan Chenxi project is about to be put into production [8] NPI Production Cuts - The latest transaction price of NPI is 910 yuan/nickel point. The previously circulated price of 895 yuan/nickel point had no transactions. NPI production cuts have occurred in China and non - free mine smelters in Indonesia due to increased losses. With no profit recovery in the downstream stainless steel sector, there is still pressure on NPI and pyrometallurgical ore prices [15] Ice - Nickel Production - Since March, ice - nickel has been in a loss state, and current production mainly meets downstream rigid demand. The break - even line for Indonesian ice - nickel corresponds to a nickel price of around $15,000. If Indonesian NPI starts to lose money, attention should be paid to NPI conversion to ice - nickel, which may bring supply pressure [21] MHP Production and New Projects - The tailings dam collapse event in late March was resolved at the end of April, and MHP production has recovered quickly. MHP maintains a profitable state with a cost equivalent to LME nickel price of $13,000/metal ton. Short - term attention should be paid to the progress of Qingshan's newly launched Chenxi project with a capacity of 67,000 metal tons [25] Sulfuric Acid Nickel Market - In the first half of the year, the consumption of ternary precursors was lower than expected, and the surplus of sulfuric acid nickel was reflected in the increase of refined nickel production. Losses in non - integrated downstream electrowon nickel have a negative feedback on the sulfuric acid nickel sector, and prices are under downward pressure [33] Domestic Electrowon Nickel and Policy - The 50,000 - ton production capacities of Indonesia's Eternity Nickel Industry and Dingxing Nickel Industry are still in the climbing stage, which will temporarily digest the new pressure of MHP. Domestic non - integrated electrowon nickel is in a loss state, and electrowon nickel production has decreased slightly [42] Stainless Steel Market - After Tsingshan gave up price support the week before last, the spot price of stainless steel collapsed, and the inventory pressure of steel mills was transferred to the terminal. In July, the production plan of 3 - series stainless steel was 1.62 million tons, a 5% month - on - month decrease but a 2% year - on - year increase. After production cuts, stainless steel profits have not recovered [45] Ternary Precursor Market - In the first half of the year, the cumulative production of domestic ternary precursors was 399,300 tons, a 3% year - on - year decrease, and nickel consumption in the new energy field was significantly lower than the initial expectation [47]