(1) Global primary nickel production increased by 4.76%, with nickel iron contributing the main increment.

According to INSG data, in recent years, global primary nickel production has remained relatively stable, maintaining around 1.98 million tons. In 2017, global nickel prices rose, driving an increase in primary nickel production, which reached 2.078 million tons that year, a year-on-year increase of 4.76%, marking a relatively fast growth rate in recent years. In the first quarter of 2018, global primary nickel production was 530,600 tons, a year-on-year increase of 6.72%, with the growth rate improving by nearly 2 percentage points compared to 2017, reflecting an accelerating growth trend in primary nickel production. We believe that factors such as the positive trend in nickel prices, the rapid release of nickel iron capacity, and the broad demand prospects for nickel sulfate will continue to boost primary nickel production.

Global primary nickel production capacity is relatively concentrated, with the top ten countries accounting for about 85% of global production. Among them, China's production in 2017 was 623,700 tons, accounting for 30% of global primary nickel production. The mismatch of nickel ore resources is also a major reason for China's reliance on nickel ore imports.

Among the domestic production of primary nickel, Indonesia's increase is particularly notable, rapidly growing from 21,000 tons in 2013 to 204,800 tons in 2017, with a compound annual growth rate of 76.72%, quickly becoming the world's second-largest primary nickel producer. The reason for this is related to Indonesia's 2014 ban on raw ore exports. This policy forced companies, especially a large number of domestic smelting enterprises, to invest directly in building nickel iron smelting plants in Indonesia, leading to a rapid expansion of Indonesia's NPI capacity. The transfer of China's nickel iron capacity to Indonesia caused a continuous decline in primary nickel production from 2013 to 2015, with a certain degree of recovery starting in 2017. Russia and Australia mainly rely on sulfide nickel ore, and the low nickel prices have led to the shutdown of several sulfide nickel smelting companies, with production dropping from 242,000 tons and 141,500 tons in 2013 to 155,000 tons and 112,100 tons in 2017, respectively. The primary nickel production in other countries has not changed significantly.

(2) Indonesia's NPI capacity is rapidly expanding, and production is expected to continue to grow at a high rate.

Before 2014, Indonesia's primary nickel production was very low, with most domestic nickel ore exported abroad, earning only a small profit. To support the development of its smelting industry and protect its nickel ore resources, Indonesia banned nickel ore exports in 2014. Other countries, led by China, invested in building smelting plants in Indonesia, leading to rapid growth in Indonesia's primary nickel production, particularly in nickel iron production. According to Antaike data, Indonesia's NPI production was only 3,000 tons in 2014, but it increased to 190,000 tons in 2017, with a compound annual growth rate of 298.61%.

According to Antaike data, the nickel iron capacity built by Chinese companies in Indonesia has begun to be released, with Indonesia's nickel iron production reaching 190,000 metal tons in 2017, and it is expected to continue to grow, with a projected production of 263,000 tons in 2018. From the perspective of specific companies, Qingshan Group's Indonesia project has 20 production lines, and Xinxing Casting Pipe Company’s Indonesia project has 4 production lines, all of which have been put into production. Jiangsu Delong's Indonesia project has 15 production lines completed, but due to funding constraints, only 2 production lines were put into operation in 2017.

Antaike data shows that the future expansion of Chinese-funded nickel iron capacity in Indonesia will mainly focus on four companies: Qingshan Group, Delong Nickel Industry, Xinxing Casting Pipe, and Jinchuan Group. Qingshan Group plans to cooperate with French Eramet to develop the Weda Bay nickel project in Indonesia, initially building 4 RKEF nickel iron production lines, expected to be put into production in 2020. Delong Nickel Industry plans to build another 30 RKEF nickel iron production lines. Xinxing Casting Pipe plans to put into production 4 more RKEF production lines by the end of 2018. Jinchuan Group plans for 4 RKEF production lines, with infrastructure construction currently underway, expecting to put 2 lines into production in 2018.

(3) China's primary nickel production is recovering, mainly driven by the growth of nickel iron.

After the implementation of Indonesia's mining ban, domestic nickel iron smelting companies began to invest in building nickel iron smelting plants locally, while domestic smelting plants also faced a shortage of raw materials. The decline in nickel iron production directly led to a drop in China's primary nickel production, which fell from 693,500 tons in 2013 to 573,400 tons in 2016. In 2017, driven by the recovery of nickel iron and nickel salt production, China's primary nickel production rebounded to 623,700 tons, a year-on-year increase of 8.77%, accounting for 30.01% of global primary nickel production. Among them, nickel iron production was 411,500 tons, a year-on-year increase of 9.79%.

In terms of nickel iron, after Indonesia's mining ban, Chinese nickel iron companies could only rely on importing nickel ore from the Philippines and consuming domestic inventory to support NPI production. In 2017, with Indonesia lifting the export ban and stable imports from the Philippines, China's NPI production quickly rebounded. There are two main reasons for this. First, smelters' profits improved, and the operating rate of factories increased, rising from about 30% in 2017 to about 40%; second, as Indonesian nickel ore gradually flowed into the domestic market, the nickel iron grade gradually improved, increasing from a nickel content of 8.5%-9% to 9%-10%, which also raised the amount of nickel metal. We expect that from 2018 to 2020, China's nickel iron production will maintain a growth rate of 9%.

(1) Global primary nickel production increased by 4.76%, with nickel iron contributing the main increment.

According to INSG data, in recent years, global primary nickel production has remained relatively stable, maintaining around 1.98 million tons. In 2017, global nickel prices rose, driving an increase in primary nickel production, which reached 2.078 million tons that year, a year-on-year increase of 4.76%, marking the fastest growth rate in recent years. In the first quarter of 2018, global primary nickel production was 530,600 tons, a year-on-year increase of 6.72%, with the growth rate improving by nearly 2 percentage points compared to 2017, reflecting an accelerating growth trend in primary nickel production. We believe that factors such as the positive trend in nickel prices, the rapid release of nickel iron capacity, and the broad demand prospects for nickel sulfate will continue to boost primary nickel production.

Global primary nickel production capacity is relatively concentrated, with the top ten countries accounting for about 85% of global production. Among them, China's production in 2017 was 623,700 tons, accounting for 30% of global primary nickel production. The mismatch of nickel ore resources is also a major reason for China's reliance on nickel ore imports.

Among the domestic production of primary nickel, Indonesia's increase is particularly notable, rapidly growing from 21,000 tons in 2013 to 204,800 tons in 2017, with a compound annual growth rate of 76.72%, quickly becoming the world's second-largest primary nickel producer. The reason for this is related to Indonesia's 2014 ban on raw ore exports. This policy forced companies, especially a large number of domestic smelting enterprises, to invest directly in building nickel iron smelting plants in Indonesia, leading to a rapid expansion of Indonesia's NPI capacity. The transfer of China's nickel iron capacity to Indonesia caused a continuous decline in primary nickel production from 2013 to 2015, with a certain degree of recovery starting in 2017. Russia and Australia mainly rely on sulfide nickel ore, and the low nickel prices have led to the shutdown of several sulfide nickel smelting companies, with production dropping from 242,000 tons and 141,500 tons in 2013 to 155,000 tons and 112,100 tons in 2017, respectively. The primary nickel production in other countries has not changed significantly.

(2) Indonesia's NPI capacity is rapidly expanding, and production is expected to continue to grow at a high rate.

Before 2014, Indonesia's primary nickel production was very low, and most domestic nickel ore was exported abroad, resulting in only minimal profits. To support the development of its domestic smelting industry and protect its nickel ore resources, Indonesia banned nickel ore exports in 2014. Other countries, led by China, invested in establishing smelting plants in Indonesia, leading to a rapid increase in Indonesia's primary nickel production, particularly in nickel pig iron (NPI) production. According to Antaike data, Indonesia's NPI production was only 3,000 tons in 2014, but it increased to 190,000 tons by 2017, with a compound annual growth rate of 298.61%.

According to Antaike data, the nickel iron capacity built by Chinese companies in Indonesia has begun to be released, with Indonesia's nickel iron production reaching 190,000 metal tons in 2017, and it is expected to continue to grow, with a projected production of 263,000 tons in 2018. From the perspective of specific companies, Qingshan Group's Indonesia project has 20 production lines, and Xinxing Casting Pipe Company’s Indonesia project has 4 production lines, all of which have been put into production. Jiangsu Delong's Indonesia project has 15 production lines completed, but due to funding constraints, only 2 production lines were put into operation in 2017.

Antaike data shows that the future expansion of Chinese-funded nickel iron capacity in Indonesia will mainly focus on four companies: Qingshan Group, Delong Nickel Industry, Xinxing Casting Pipe, and Jinchuan Group. Qingshan Group plans to cooperate with French Eramet to develop the Weda Bay nickel project in Indonesia, initially building 4 RKEF nickel iron production lines, expected to be put into production in 2020. Delong Nickel Industry plans to build another 30 RKEF nickel iron production lines. Xinxing Casting Pipe plans to put into production 4 more RKEF production lines by the end of 2018. Jinchuan Group plans for 4 RKEF production lines, with infrastructure construction currently underway, expecting to put 2 lines into production in 2018.

(3) China's primary nickel production is recovering, mainly driven by the growth of nickel iron.

After the implementation of Indonesia's mining ban, domestic nickel iron smelting companies began to invest in building nickel iron smelting plants locally, while domestic smelting plants also faced a shortage of raw materials. The decline in nickel iron production directly led to a drop in China's primary nickel production, which fell from 693,500 tons in 2013 to 573,400 tons in 2016. In 2017, driven by the recovery of nickel iron and nickel salt production, China's primary nickel production rebounded to 623,700 tons, a year-on-year increase of 8.77%, accounting for 30.01% of global primary nickel production. Among them, nickel iron production was 411,500 tons, a year-on-year increase of 9.79%.

In terms of nickel iron, after Indonesia's mining ban, Chinese nickel iron companies could only rely on importing nickel ore from the Philippines and consuming domestic inventory to support NPI production. In 2017, with Indonesia lifting the export ban and stable imports from the Philippines, China's NPI production quickly rebounded. There are two main reasons for this. First, smelters' profits improved, and the operating rate of factories increased, rising from about 30% in 2017 to about 40%; second, as Indonesian nickel ore gradually flowed into the domestic market, the nickel iron grade gradually improved, increasing from a nickel content of 8.5%-9% to 9%-10%, which also raised the amount of nickel metal. We expect that from 2018 to 2020, China's nickel iron production will maintain a growth rate of 9%.