Since early 2024, nickel pig iron (NPI) and refined nickel prices have declined and hit bottom, with reduced price volatility. The global nickel market remains in a state of oversupply.
Source: SHFE
Nickel ore:
On the supply side, laterite nickel is generally easier and less costly to explore and mine compared to nickel sulfide ores. Indonesia, home to the world's largest laterite nickel resources, continues to offer globally competitive nickel ore prices.
To attract foreign investment and increase fiscal revenue, the Indonesian government has introduced a series of resource control and mining investment support policies. These include raising the approval threshold for the RKAB, increasing royalties for nickel mining, implementing the Simbara system to monitor the entire nickel ore trade process, and designating priority industries with corresponding incentives. Nevertheless, data from 2025 shows a notable shift. The total volume of approved RKAB quota and Indonesia's nickel ore exports to China--up nearly 100% year-on-year--suggest that the previously tight nickel ore supply situation has shown signs of easing compared to 2024.
NPI and Nickel intermediates:
In 2024, Indonesia revised its RKAB approval regulations for mineral resources. As a result, global NPI production declined year-on-year, but stainless steel production continued to grow. In Q4 2024, NPI margins temporarily reached parity with those of nickel matte.
By April 2025, nickel prices experienced a sharp decline, pushing most nickel matte operations into a loss-making state. Given the interchangeability of matte nickel and NPI production lines, many producers shifted production from nickel matte to NPI to mitigate losses. Meanwhile, operations using the hydrometallurgical process--known for lower operating costs--have continued to generate positive margins despite falling prices. Most hydrometallurgical plants have maintained a strategy of maintaining production to preserve profitability.
Notably, despite the unexpected breakdown in nickel prices, nickel smelting production in both China and Indonesia has not shown any significant decline. According to Mysteel, the total nickel pig iron (NPI) production in China and Indonesia is expected to reach 2.05 million tonnes in Ni content in 2025, up 12% year-on-year. Nickel matte production is forecasted at 450,000 tonnes, a modest increase of 0.7%, while MHP production is projected at 480,000 tonnes, marking a sharp 42% year-on-year surge.
In contrast to the 2024 situation, when nickel matte and MHP each accounted for roughly half of Indonesia's nickel intermediate production, the structure and growth pattern have notably shifted since late 2024. As more nickel matte production lines have been converted to produce NPI, and MHP projects have ramped up or commenced operations, the share of MHP in Indonesia's nickel intermediates has continued to rise.
While pyrometallurgical projects are experiencing stagnation in capacity growth, hydrometallurgical projects remain on a strong upward trajectory. This shift favors the increased use of the lower-cost MHP over matte nickel in both Indonesia and China. As MHP gradually becomes the dominant raw material for refined nickel and nickel sulfate production, it may undermine the cost support previously provided by nickel matte.
Refined nickel and Nickel sulfate:
In 2025, although nickel intermediate production in China and Indonesia continues to grow, the year-on-year growth rate has slowed compared with 2024. The temporary supply tightness caused by nickel matte production cuts and line conversions in Indonesia during March and April led to a notable rise in discount coefficients for products priced against refined nickel benchmarks. Nickel sulfate production also rebounded as a result.
The overall production growth of nickel intermediates, refined nickel, and nickel sulfate in both China and Indonesia has remained broadly synchronized, effectively alleviating the refined nickel delivery shortfalls experienced in 2024. Moreover, the apparent consumption of refined nickel in China from January to May 2025 has shown a solid performance, registering a year-on-year increase compared to the same period last year.
Stainless steel sector:
On the demand side, China's stainless steel sector had previously maintained production growth. However, since April 2025, concentrated production cuts have occurred across 300-series and 200-series steel mills. Unlike previous instances where production cuts had minimal impact, market expectations now suggest that stainless steel production growth in China and Indonesia may struggle to exceed 5% this year. A key market concern is the unusual phenomenon of production reduction without corresponding inventory drawdowns.
Among key stainless steel deliverable product producers, some began implementing more significant production cuts in May. However, this failed to support stainless steel futures prices. Given that major mills had already reduced 300-series crude steel production in April, they are now reluctant to make further cuts amid a weak market and choose instead to defend market share.
New energy sector:
In the new energy sector, the share of ternary batteries produced from nickel in total power battery production has been gradually declining in recent years. From January to April 2025, China installed a total of 184.3 GWh of power batteries, up 52.8% year-on-year. Ternary batteries accounted for 34.3 GWh, or 18.6% of the total, representing a 15.9% year-on-year decrease.
Correspondingly, since 2022, the production of ternary precursors--a key input for ternary batteries--and the associated nickel demand have shown limited annual fluctuations. Although refined nickel demand in the first five months of 2025 remained strong and the oversupply of nickel intermediates is not yet significant, growth in nickel sulfate capacity and downstream ternary material producers is expected to remain modest. Nonetheless, ternary batteries continue to face declining competitiveness against lithium iron phosphate (LFP) batteries in terms of cost and economic efficiency, thus limiting the growth potential of raw materials associated with ternary technology.
Written by Cora Ji, jiruyan@mysteel.com
