COMMODITY MARKET REPORT

MARCH 2021

Global nickel long-term outlook

Q1 2021
Global nickel long-term outlook Q1 2021

Executive summary
Since the last LTO in December, our cumulative forecast global nickel surplus for 2022-2026 has flared out to almost 800 kt
compared with the prior sub-250 kt. Counter to that, our average price forecast over the same period stands at almost
US$14,740/t (US$6.70/lb – current), a little higher than the US$14,420/t (US$6.55/lb) as stated at the end of 2020. Yet despite
appearances, these prices also take stock of stronger annual average growth in global demand of 4.7% a year compared with
4% in the prior report. Clearly, the anticipated surge in supply (almost all of it in Indonesia) is astounding and currently reflects
the investment programme to upgrade ore into nickel pig iron (NPI) to service stainless steel plants in both Indonesia and China.

Although the quantities now involved are larger than expected, this trend was not surprising. Indeed, we highlighted this upside
potential for nickel in NPI output in Indonesia in our Nickel - Things to look for in 2021 insight at the start of the year. We also
highlighted in the same insight the probability that some of this NPI would be converted to matte at some point during 2021, and
this month Tsingshan – announced it is to modify some of its NPI lines at Morowali Industrial Park with the equipment necessary
to make nickel matte, possibly as soon as from H2 this year. That matte would then be upgraded into suitable raw materials for
the rechargeable battery sector.

If these expectations are realised over the mid-term they will have a dramatic impact on the final products being made in
Indonesia, as well as the nickel product trade flows between Indonesia and China, and between China and the rest of the world.
If Tsingshan has not already shown how much power it wields over the global nickel and stainless markets, the ability to choose
whether to make NPI or matte according to market conditions does not just solidify its grip further, but also extends its might
from stainless steel to rechargeable batteries, the principal growth area of global nickel demand over the next two decades.

Tsingshan’s “NPI to matte” announcement brought an end to the 11-month bull run in nickel prices. Up to that point, it looked
like the run would continue into Q2, given that not just China but the EU and the USA are experiencing a strong demand revival,
which promises to extend into 2022. But the prospect of being able to switch nickel originally made for the stainless sector into
something for batteries took the heat out of the market, which had convinced itself that a shortage of nickel for batteries was
looming. Now, says Tsingshan, this need not be the case, and very suddenly the bulls turned to bears as nickel lost 20% from
its US$19,650/t (US$8.90/lb) high in just a couple of days.

In effect, the mini-crash came one quarter earlier than we expected, but it has little impact on our mid-term price outlook. While
this year’s market will be balanced, substantial surpluses begin in 2022 (+154 kt) and to extend through to 2026 (+89 kt). Late-
2025 should be the trough for prices at under US$12,700/t (US$5.75/lb, real), but as few producers will be sorely affected
financially, we do not expect any significant supply-side cuts.

On the upside, if the “NPI to matte” story plays out the way Tsingshan intends, we might not see such surpluses if the EV
markets in China (and subsequently in Indonesia) also grow faster than we currently anticipate, for the nickel units will not be
hanging over the stainless sector in China but will be absorbed by a stronger battery sector.

And one possible downside for prices would be that by 2030 we can expect to see significant quantities of additional nickel units
being recovered from the spent EV battery recycling sector. Several new names are gearing up to process these materials, and
how we are now reflecting their contribution to the global balance is outlined in our “In Focus” article inside.

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Global nickel long-term outlook Q1 2021

Market outlook and price

Nickel price rally ends The rally that started April 2020 and took nickel prices to around US$19,700/t (US$8.94/lb) by mid-
February is now over. A correction in late February knocked prices back to US$18,650/t (US$8.45/lb) on 1 March but support
was then swiftly removed when Tsingshan made its announcement on 3 March, about plans to switch some production from
NPI to nickel matte for the battery stream.

Rally driven by battery outlook for nickel Last year’s rally defied fundamentals of resurgent supply (as Indonesian NPI) and
demand destruction (due to the covid pandemic) that resulted in a global surplus approaching 200 kt. But with lockdowns
dissipating, Chinese demand rebounding strongly and market optimism signalling that “the worst is over”, prices rallied, and kept
rallying. At the same time, governments everywhere were seeking to accelerate electrification, thereby increasing forecasts of
electric vehicle uptake and the projections for nickel demand in batteries. What mattered was that batteries were going to need
a lot of nickel soon, yet all the growth in supply was coming from NPI in Indonesia, a nickel raw material deemed unsuitable for
the battery stream. Higher nickel prices were being driven by the perceived shortage of Class 1, the perceived nickel raw
material of choice for the batteries.

Perceived shortfall solved by Tsingshan Tsingshan’s announcement about switching some NPI to nickel matte, a nickel raw
material that could be further refined to class 1 or nickel sulphate, changed all that. It does not matter that the company has not
clarified exactly how it intends to adapt its flow sheet in Morowali. The presumption is that instead of making NPI, some of the
RKEF lines in IMIP will start producing matte. In other words, the sole area of growth in global nickel supply is no longer
restricted for use in stainless steel alone; it can now be turned towards battery consumers.

Nickel supply demand and price, 2020-2030

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
kt
Mine prodn 2605 2770 3235 3437 3518 3590 3560 3516 3517 3544 3564
Smelter prodn 2518 2562 2901 3043 3133 3193 3190 3211 3217 3258 3279
Primary refined prodn 2565 2630 2987 3159 3261 3312 3329 3347 3352 3391 3410
Secondary refined prodn 0 0 0 11 15 26 38 46 59 75 99
Total refined prodn 2565 2630 2987 3169 3276 3339 3367 3393 3411 3467 3509

Consumption 2322 2610 2833 2939 3053 3159 3278 3374 3457 3577 3649

Balance 243 20 154 231 223 180 89 19 -46 -111 -140

Stocks 1572 1591 1746 1976 2199 2379 2468 2487 2441 2330 2190
Days of consumption 248 223 225 245 263 275 275 269 258 238 219
LME price
Current USc/lb 625 750 716 675 640 631 680 765 850 925 1050
Real USc/lb 634 750 699 646 600 580 613 676 736 786 874
Current US$/t 13772 16540 15791 14890 14110 13911 14991 16865 18739 20393 23149
Real US$/t 13979 16540 15405 14242 13231 12789 13512 14903 16234 17320 19275
Source: Wood Mackenzie

Nickel prices dropped sharply Consequently, a key factor supporting high nickel prices was suddenly removed and prices
dropped steeply, falling by US$2,500/t in only two days, to US$16,144/t (US$7.32/lb) on 4 March, where they have since
remained. That such damage to prices was done on only the suggestion that matte production would start later in the year is
telling. Confirmation that production has started – when it does - could trigger a further decline, as could the spread of this

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Global nickel long-term outlook Q1 2021

strategy when other companies sense a good thing and follow in Tsingshan’s shadow. Therefore, the price risk for later in the
year and into 2022 is firmly on the downside.

Yet demand is currently strong Ironically, demand for nickel outside China – especially in stainless – is currently much
stronger than previously expected and has been that way since the fourth quarter of last year. Consequently, forecast growth in
global demand – at 9.5% - is stronger than in prior reports and that strength will continue into 2022 before moderating in 2023.
In particular, the European stainless segment is back to growth for the first time since H1 2018. So, global nickel demand is not
just a China story at present, although expansions both there and Indonesia between now and 2025 remain the main demand
driver for nickel consumption over the next few years.

Nickel price decreases through 2022 This resurgent demand had been one of the pillars of our expectations that the nickel
rally would continue into the second quarter. Although this is now unlikely following the drop to US$16,000/t (US$7.25/lb),
demand strength may keep prices relatively buoyant through Q2 and permit some uptick in the first half of 2022 and 2023. But
ultimately, we expect the underlying trend of the next few years to point downwards. Thus, prices will end 2021 at between
US$15,000/t (US$6.80/lb) and US$16,000/t (US$7.25/lb), to give a year average of approximately US$16,540/t (US$7.50/lb). A
further retreat will lower the average by 5% in 2022, to US$15,790/t (US$7.16/lb).

Oversupply due to Indonesian NPI The main justification for the decline is the surge in NPI production in Indonesia, which is
expected to increase with a CAGR of 18% over the next four years, to 1.19 Mt in 2024. Indeed, this is the main factor
contributing toward 13.6 % growth in global refined nickel supply in 2022 alone (up by more than 350 kt in one year). With so
much nickel coming to market, global supply will exceed demand by 150-230 ktpa in the 2022-2025 period, leaving a cumulative
surplus for those four years alone of 790 kt. Indeed, the market does not return to deficit until 2028, 10 years after the prior
shortfall, and in that decade accrues a cumulative surplus of 1.12 Mt.

Prices continue to fall through 2025 As the surplus builds so prices will fall to a low of US$12,790/t (US$5.80/lb, real) in 2025,
with spot prices below US$12,000/t, although they will need to fall to much lower levels to trigger any supply side correction (see
Scenario analysis).

Substantial excess accumulating over the next five years

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Global nickel long-term outlook Q1 2021

Global nickel supply and demand - long-term structural shortage

New nickel supply needed from 2029 Prices recover somewhat as the annual surplus narrows, before increasing more
earnestly as the market returns to deficit. By the late 2020s, demand catches up with supply helped by the accelerating strength
in demand for nickel in batteries, which by then will account for almost one fifth of global demand. By 2029, even with battery
recycling ramping up its contribution of secondary nickel to global supply, we believe the market will start depending on nickel
from unspecified resources in our possible projects list. This requirement increases to 70 kt in 2030 and 685 kt in 2036.

Long-term price is US$17,900/t (US$8.12/lb) Together with probable projects the total global primary supply adjustment will be
823 kt in 2040. We estimate that at least 45% of this total will be backed by Chinese companies for Chinese consumption which,
given precedent, will be achievable at lower prices than is typical in the rest of the world. This leaves about 440 kt of new nickel
supply to be found in the rest of the world by 2040 (see the “ChinaBalance” and “RoWBalance” sheets in the “market balance &
prices” download). Our nickel costs research indicates that the promise of long-term nickel prices attaining US$17,900/t
(US$8.12/lb, real) should be enough to incentivise investment and development of these projects.

Scenario modelling
Our base case assumes that the nickel price rally of the past 12 months is over, principally due to Tsingshan’s statement about
producing matte later this year, which leaves nickel units which were originally destined for NPI production in a position to feed
both stainless and battery markets in the future. Notwithstanding the strong recovery in demand this year and in 2022, up by
approximately 9% a year, expansion in NPI and/or matte still leaves the market in oversupply, with a substantial cumulative
surplus through to 2026. On that basis the underlying trend in the nickel price will be down through this period, to an annual
average low of US$12,780/t (US$5.80/lb, real) in 2025.

The scenario models the impact of weak fundamentals forcing a more rapid decline in price, to an annual average low of about
US$9,500/t (US$4.30) by 2023. Such low prices would leave a sizeable portion of the industry in a potentially loss-making
position and could force a production correction, or even some suspension. On this basis we assume production cuts of 200 kt,
starting in 2023, which would be enough to return the market to balance in 2024 and then deficit in 2025. This would trigger an
upturn in the nickel price that would continue through to 2026.

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Global nickel long-term outlook Q1 2021

Base case and production correction price scenarios

Base case and production correction price scenarios

2019 2020 2021 2022 2023 2024 2025 2026

Base case
Stock days 201 232 214 217 238 256 268 268
Nominal US$/lb 631 625 750 716 675 640 631 680
Real US$/lb 648 634 750 699 646 600 580 613
Scenario
Stock days 201 232 214 217 227 219 206 193
Nominal US$/lb 631 625 700 580 450 525 700 800
Real US$/lb 648 634 700 566 430 492 644 721
Source: Wood Mackenzie

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Global nickel long-term outlook Q1 2021

In focus: EV battery supply headache

Electric vehicle (EV) batteries are not just a consideration for demand analysis. In the future they will be a necessary, and
potentially, significant source of nickel supply.

To varying degrees and in different ways, all LME-quoted metals generate and consume scrap. How scrap flows are reported
and shown in metals analysis, however, depends on how integral scrap’s contribution is to any given metal’s overall market
balance. In copper, for example, we have always shown the contribution of scrap in smelter and refinery supply (+/- 5-7% of
total supply), but it also accounts for a significant portion of first-use demand (+/- 20%) because of clean scrap’s direct use in
the new production of semis, such as wire rod and cast cake or billets. Zinc is similar in that dusts recovered from galvanised
steel scrap-melting electric arc furnaces (EAFs) and other residues provide roughly 10% of newly-cast slab supply, whereas
direct use of re-melted brass scrap accounts for a portion of total zinc consumption in new brasses and alloys.

In nickel, on the demand side, scrap is important in stainless steel melting, the first use area which has long accounted for 60-
70% of global primary nickel consumption. Regionally, scrap use in stainless melts can account for 20% to 80% of total nickel
unit requirements but, whatever the level, the main point is that this secondary form of impure nickel displaces primary nickel
unit demand. Other secondary materials and recycled wastes such as spent catalysts, sludges and other feeds go back into
relatively few nickel smelters, are modest in overall nickel units and thus, are not currently identified in our supply side analysis
specifically.

However, just as we grapple with how rechargeable batteries for electric vehicles will increase future primary nickel demand, so
too must we begin to consider how many of these batteries will be recycled and how much of the metals contained within them
will return to supply as secondary feed.

The current regional split in nickel units recovered from EV and energy storage batteries

It is the fact that spent batteries will need to be processed to recover the nickel units, as opposed to stainless steel scrap, which
is used directly, that has necessitated a change in the way we report this future supply stream.

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Global nickel long-term outlook Q1 2021

We have accounted for the nickel units coming back into the market from spent EV batteries since Q1 2020. This was achieved
by combining recycled tonnage with primary refined production, on a country-by-country basis, to give total supply. This was
based on the broad assumption that EVs would be recycled in the same country/region in which the vehicle was originally sold.
Thus, EVs sold in China are likely to be dismantled and recycled in China, with the battery metallics also being recovered to new
nickel sulphate in China. Similarly, it is likely that EVs on roads in Europe could end up being recycled in any European country,
so these are apportioned regionally, to Europe.

But this method created problems, not least the fact that by combining the data in this way meant that there was no distinction
between the supply of primary and secondary nickel. It also masked the true impact of recycled nickel supply on the market
balance. Equally, the addition of recycled battery nickel to total primary refined supply concealed the fact that over the long term,
primary supply of any metal tends to decline due to ore resource depletion. In our current base case, attrition for this reason
reduces primary refined output by 230 kt between 2030 and 2040, with the likes of Cerro Matoso, Long Harbour, Koniambo,
Barro Alto and others all likely to close unless new resources are identified. But adding in the secondary feed coming from spent
batteries appeared to reverse that decline for nickel.

To resolve these issues, in this LTO, we report separate figures for global primary refined nickel output and global secondary
refined output from EV batteries. In the chart below, their respective contribution to long-term nickel supply is now self-evident
and it highlights how substantial this secondary supply could be in the future. Secondary recovery from batteries is already
under way at low levels, but as the importance of recycling accelerates the contribution to global nickel supply will increase to
100 kt by 2030 and 640 kt a decade later.

The contribution to total global supply of nickel recovered from rechargeable EV batteries

Not surprisingly, the quantity of nickel coming from battery recycling will reduce the future burden on producers of developing
new resources. Currently, our base case requirement for nickel from new, unidentified nickel project developments stands at
680 kt by 2040, but this would increase to 1.32 Mt without the additional nickel that battery recycling will make available.
Assuming an average capital expenditure for a greenfield nickel project to be around US$40,000/t Ni/a, the necessary total
spend would increase from ca. US$27 billion to over US$53 billion by 2040. Given the paucity of nickel project construction
outside Indo-Chinese developments in Indonesia, it is very hard to see this amount of money being made available, particularly
if ESG issues are factored into the equation to constrain acceptable nickel units for OEMs.

Thus, it is recyclers and recycling that truly have the edge in terms of possible financing as we consider the future of nickel
supply for our long-term outlook.

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Global nickel long-term outlook Q1 2021

Demand
Strong rebound in demand 2021-2022 Although China led the nickel demand recovery after the widespread lockdowns of H1
2020, other regions had a strong period in Q4 last year, at least in stainless and battery chemicals, and this trend has continued
into the first part of 2021. After global contraction in demand of 1.2% in 2020, anticipated growth in 2021 is 9.5%, to 2.61 Mt,
with a further 8.6% growth in 2022, to 2.83 Mt. In subsequent years, growth will be boosted by ever-strengthening demand for
battery chemicals to power electrification. Thus by 2025, global nickel demand will stand at 3.16 Mt and will continue to increase
at around 3% a year, to 3.65 Mt in 2030. Later, CAGR of around 2% will raise world nickel demand to 4.42 Mt by 2040.

China and Indonesia are pivotal Regionally, Asia will remain the powerhouse of nickel demand largely through China’s
ongoing dominance of both global stainless and battery chemicals production. In both segments the other key nation of
influence will be Indonesia, where the extraordinary ramp up NPI production is supporting the expansion in domestic stainless
melting capacity to more than 5 Mtpa this year – the world’s second biggest producer. It matters not that our projections of NPI
supply will soon exceed the combined requirements of both the Chinese and Indonesian stainless industries, because of the
announced intent of Tsingshan to adapt its NPI flow sheet to produce matte intermediate for the battery raw materials stream.

World stainless to reach 69.4 Mt in 2030 World stainless melt output in 2020 decreased by less than 1% in 2020, to 52.0 Mt,
largely due to a combined 8% growth in China and Indonesia, mostly in austenitic grades that contain nickel. The rest of the
world, however, contracted by 13.4%. This year, still more new capacity in China and Indonesia, as well as the strong rebound
in demand across the mature economies will support 12 % growth in global stainless melt output, to 58.2 Mt. Thereafter, growth
will slow to 5% in 2022 and then about 1-2% a year, to 65.2 Mt in 2025, and 69.4 Mt in 2030. Over the same period, primary
nickel uptake in stainless will increase more slowly, from around 1.9 Mt in 2021 to 2.15 Mt in 2030. This is largely due changes
in China where scrap use is likely to rise, and non-nickel ferritic grades will grow their share of the market. By 2040, global
stainless output will be 74.3 Mt, consuming around 2.32 Mt of primary nickel.

Global nickel consumption by country

CAGR Net kt CAGR

2020 2021 2022 2023 2024 2025 2030 2035 2040 '20-2025 '20-2040 '20-2040
Europe 252 289 322 330 337 341 351 354 354 6.3% 103 1.5%
United States 117 114 123 127 131 135 144 153 163 2.9% 46 1.4%
Japan 150 157 166 169 173 177 207 245 292 3.3% 142 2.9%
China 1443 1488 1608 1673 1732 1796 1961 2260 2407 4.5% 964 2.2%
Indonesia 190 305 339 341 344 346 360 374 387 12.8% 197 3.1%
South Korea 79 85 89 90 92 92 98 106 117 3.3% 38 1.7%
Others 153 171 187 209 246 272 529 645 703 12.2% 550 6.9%
Global Total 2383 2610 2833 2939 3053 3159 3649 4136 4423 5.8% 2040 2.7%
Source: Wood Mackenzie

Nickel for batteries to rise at 15-20% a year The deceleration in nickel uptake in stainless will be offset by the rise in demand
for nickel in battery precursor chemicals, principally for EVs. Globally, after a 13 % post-lockdown recovery this year, to 174 kt,
the outlook is for annual growth of 15-22% a year over the next decade, reaching 795 kt by 2030. By then, EV battery chemicals
will account for more than 20% of the market, whereas the share taken by stainless will have fallen from 70% to 60%. By 2040,
stainless will only account for 50% of the market whereas EV demand (including batteries for energy storage), at 1.3 Mt, will
have a 30% share.

China will dominate battery precursors China will be a key producer of precursor chemicals, accounting for around half of
global requirements by 2030. Much of the rest will be produced in Asia, especially in Japan and South Korea, with lower levels
in Europe and the US. The balance, which is currently unidentified, is represented in our model by precursor chemicals in “Other
Asia”.

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Global nickel long-term outlook Q1 2021

Global nickel consumption by region

Main changes in nickel consumption since the prior quarter

Main changes mostly relate to China Since the prior quarter report, forecast nickel demand has increased by more than 100
kt in 2021 and by up to 250 ktpa in later years. These changes are partly accounted for by new melt shop capacity in both China
and Indonesia that we have included in our base case for the first time (see below). At the same time, such will be the
availability of NPI, at least in the near term, that the requirement for scrap in China is lower than previously assessed (also see
below). We still allow for an increase in scrap use over the long term as the domestic scrap pool gets larger, but this is at a
slower pace than previously modelled. The changes in demand for the Rest of Asia reflect our revised apportioning of long-term
demand for nickel in battery precursors between China and “Other Asia”. Thus, in the early- to mid-thirties, forecasts for nickel in
Chinese battery precursors have gone up whereas the equivalent figures for "Other Asia" have fallen a similar amount. This
pattern was reversed for 2037-2040.

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Nickel in stainless steel

Asia
Steady growth in nickel demand to 3.06 Mt in 2030 The Covid-19 pandemic limited growth in Asian nickel demand to 1.7% in
2020, but that it was positive at all is due to the strong stainless production rates in China and Indonesia. Recovery from the
pandemic will facilitate regional growth of nearly 10% this year, to 2.13 Mt, assisted by further expansion in Chinese and
Indonesian stainless as well as resurgent battery chemicals demand. Growth will be similarly strong in 2022, up 8% to 2.31 Mt,
before slowing to a CAGR of 3.5% over the rest of the decade, to 3.06 Mt in 2030. Over that period, stainless melt production
will increase from 47.5 Mt in 2021 to 57.9 Mt in 2030, with primary nickel uptake rising from 1.66 Mt to 1.90 Mt. At the same
time, demand for nickel in battery precursors will increase by a net 600 kt, from 170 kt in 2021 to 780 kt in 2030.

Still more stainless melting capacity in China Long-term Chinese nickel demand will be driven both by stainless and
batteries. Over the next few years, there appears to be no let up in the appetite for melt shop expansion, with 6.6 Mtpa of new
capacity in our base case due to start by the end of 2022, and 5 Mtpa planned by 2025. This includes 1.36 Mtpa at Jiangsu
Delong (Xiangshui) and more than 3 Mtpa at Baowu Desheng, taking total capacity to more than 5 Mtpa. This essentially
represents the re-emergence of the former Baosteel Stainless complex that since 2018 has progressively decamped from
Shanghai to the Desheng site in Fujian.

Potential expansion in Chinese stainless melting capacity, by project

Big plans for Tisco and Tsingshan In addition, two other majors are citing plans to add new large facilities to their already
impressive portfolios. Tsingshan wants to build a new 4 Mtpa complex in Yanjiang (Guangdong), where the 2 Mtpa GuangQing
stainless mill is already sited. Not to be outdone, Tisco, formerly China’s biggest stainless producer, has also clarified ambitious
expansion plans since being taken over by Baowu. After producing at around 4.0-4.5 Mtpa in recent years, Tisco expects to
increase that to 6.5 Mt in 2021, 15 Mt in 2023 and 18 Mt by 2025. Neither plan is in our base case at present pending further
substantiation.

Consolidation coming Tisco’s impressive targets appear optimistic, even considering the speed of China’s stainless capacity
expansion in the past decade. But how could Tisco build that much capacity that quickly? It is possible that some contribution
could come from existing carbon steel capacity in Taiyuan being switched over to stainless. However, Tisco has also expressed
an interest in communicating with other players to jointly invest in stainless projects. As Tisco is now officially the Baowu

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Global nickel long-term outlook Q1 2021

stainless brand, it is possible that acquisitions by Baowu, rather than new builds, would take Tisco towards those targets.
Indeed, from this year, output from Desheng may now fall under the Tisco banner which, coincidentally, would raise Tisco output
close to the stated 6.5 Mt for 2021. In any case, with such large numbers now in circulation, and a small clutch of big companies
vying for still larger shares of their home market, further consolidation in the Chinese stainless industry is likely in the mid-term.

Other nickel raw materials losing out to NPI The other trend worth watching is how the patterns in nickel raw materials use
will change in the years ahead. As we have noted in recent reports, there is now so much NPI available to Chinese mills that
they only need to use small quantities of class 1 nickel in stainless steelmaking. At the same time, abundant NPI has dampened
scrap use to a ratio of only 16-18%. If NPI continues to increase in availability there is no need to raise scrap use above this
level and there will be a declining need to keep importing FeNi from other countries. Assuming class 1 is maintained at the
minimum level of around 6% of total nickel unit requirements, then prices will ultimately determine the mix of NPI, scrap and
FeNi, but with NPI being such a low cost product and domestic scrap availability likely to increase markedly, “western” FeNi
producers are at most risk of losing customers.

The changing use of nickel raw materials in Chinese stainless steelmaking

Matte conversion also a factor to watch There is one further layer of complexity to add to this evolving situation: the likelihood
that some of the RKEF lines in Indonesia are converted so that instead of producing NPI for stainless they produce nickel matte
intermediate for the battery chemicals streams. Tsingshan’s 3 March announcement declared that this could start from October
2021, and if successful then other companies would likely follow in its footsteps. But if matte is produced in this way, then there
will be less NPI for stainless which, at the very least, would mean scrap ratios would have to rise above our new target of 25%
by 2030.

Europe
European stainless finally turns positive European stainless mills are finally emerging from a decline that started in the
middle of 2018. Stiff competition from imports, chiefly from Asia, was the main issue, as well as weakening end user demand,
particularly during the early stages of the Covid-19 pandemic in H1 2020. However, the combination of a rebound in demand
and a decline in imports (partly due to new duties and partly due to a sharp increase in freight rates) resulted in strong orders to
the mills from late 2020 through to Q1 2021. As post-pandemic recovery continues, we forecast 10% growth in stainless melt
output in 2021, to 7.1 Mt, which will support nearly 15% growth in primary nickel demand, to 289 kt.

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Global nickel long-term outlook Q1 2021

Long-term trend still flat to down Growth will moderate to 2.6% in 2022 and then remain broadly flat over the long term, with
long-term stainless melt output capped at around 7.5 Mtpa, approximately the same as the last peak in 2018. Primary nickel
uptake will steady at around 160-170 ktpa. The risk, however, lies on the downside.

Duties against Asian imports key for the future The European mills’ struggle against competitively priced imports from Asia
was not helped by the introduction of safeguard measures to combat the anticipated surge of imports that, before the US 232
tariffs, would have gone to the USA. While discussions go on to decide whether to extend the safeguards, the introduction of
other duties – mostly anti-dumping and counter-veiling measures against China, Taiwan, Indonesia and India - finally appear to
be having a positive impact. Currently, neither hot-rolled or cold-rolled stainless product can be imported from these countries
tariff-free (preliminary duties on cold rolled from Indonesia and India, though not yet confirmed, are expected shortly) and that
appears to have removed the main threat of low cost, competitively priced stainless steel.

WTO case may help Tariffs usually remain in place for five years before review, so the Europeans may have until 2025 to take
back lost share and establish a better defensive position against any future onslaught. Help may come from the case brought to
the WTO protesting the Indonesian ban on exports of nickel ore because of the monopolised advantage it gives to Indonesian
stainless steel producers – namely Tsingshan – in being able to sell stainless around the world at low prices. The hope is that a
successful protest to the WTO would ease the ban and ultimately raise ore prices and, therefore, reduce the competitiveness of
Indonesian stainless in the European market.

Europeans also ahead in ESG Equally, it is clear from recent quarterlies, that the European mills are positioning themselves
as purveyors of responsible ESG: stainless is 100% recyclable, scrap is used – recycled – in large quantities, and carbon
footprints are allegedly some of the lowest in the industry. Their appearance as clean and green is arguably less demonstrable
for competitors in China and Indonesia, and that could be a key determinant for all consumers who, in the future, will also need
to be seen to be obtaining materials from responsible sources. But with Tsingshan acknowledging earlier this month the
importance of emissions standards by announcing its intent to install wind and solar energy plants at the Morowali nickel-
stainless complex in Indonesia, this race is already on.

Nickel demand in non-stainless surges in 2022 Demand for nickel in non stainless will also recover strongly, with growth in
2022 exceeding that of 2021 primarily because of the lag in recovery of the aerospace segment and its impact on the demand
for nickel alloys. At the same time, BASF’s new battery precursor plant in Finland will enter production in 2022 and consumption
of nickel sulphate at this plant will further boost the growth in non-stainless nickel demand in that year. Thus, non-stainless
nickel demand will increase by 34% between 2020 and 2022, to 159 kt in that year, before slowing as it steadily rises to
approximately 190 kt in 2040.

North America
Stainless output steady at 2.8 Mtpa As in Europe, stainless steel melt production has recovered more quickly in the USA than
anticipated but, even so, nickel demand in the USA will still take until mid-decade to return to pre-pandemic values. With the
commodity grade flat products segment of the stainless steel market dominated by two major players – NAS and Outokumpu -
from the end of this year, we expect more stable melt output over the long term, hovering around the 2.8 Mtpa and consuming
40-42 ktpa primary nickel.

Recovery in nickel alloys delayed to 2025 The more important segment for primary nickel demand in the US – nickel alloys
and superalloys in aerospace and energy applications – will take longer to come back. Despite the Covid-19 vaccine now finding
its way across populations, air and passenger ship travel will likely remain heavily reduced this year and possibly into 2022. The
knock-on effect, especially in air travel, is lower demand for replacement engines and lower maintenance on currently under-
utilised equipment. Following warnings from leading frame-makers and engine makers on the low return to health of their orders,
we do not expect to see US nickel demand in this segment return to its 2019 level of 70 kt until 2025-2026. As would be usual in
that business, the famine will be followed by a feast, and renewed equipment demand will take nickel consumption up to 80 ktpa
by 2031-32.

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Global nickel long-term outlook Q1 2021

Nickel in batteries
China and Indonesia at the forefront China remains at the forefront of EV battery developments, from battery making and
upstream through cathode materials, precursor chemicals and nickel sulphate production. However, Indonesia could be hot on
its heels given the ongoing investment in HPAL plants to produce nickel intermediates primarily for the battery supply chain.
Tsingshan’s announcement this month about the conversion of existing NPI lines to matte production, also for the battery
stream, emphasises that point further.

The latest investment in capacity include Guangdong Dowstone Technology’s intended investment in a new Li-ion battery
materials plant in the Longnan industrial zone, Jiangxi province. The project, to be run by Jiangxi Jiana Energy Tech., will cost
US$1.15 billion and have a capacity for 30 ktpa of nickel cathode material precursors (for which primary nickel requirements
would be 10-15 ktpa), as well as the capability to recycle 50 ktpa of scrap Li-ion batteries. Commercial operation is scheduled
for the end of 2022.

CNGR Advanced Material announced an investment of US$3.6 billion for the construction of a vehicle battery plant in Guangxi
Zhuang region of southwestern China. Ternary precursor capacity is stated as 150 kt and 70 kt of nickel and cobalt products.
First production will not be before 2023, however.

Ningbo Rongbei is preparing to start building the second and third phases of its battery cathode material plant in Zunyi City,
currently 15 ktpa. These next two stages will add a 15 ktpa line before the end of 2021, and then a further 70 ktpa by the end of
2024. The main products are intended to be NMC811 materials containing approximately 50% by weight of nickel, thereby
indicating a potential nickel consumption rate of 50 ktpa by 2024.

Indonesia’s new battery hub Indonesia’s efforts to become a major hub in the battery supply chain have been boosted
recently by South Korea’s LG signing a US$9.8 billion electric vehicle battery deal, including plans for a mine and smelter in
Maluku Island. CATL also plans to invest US$5 billion in a Li-ion battery plant. It is not clear if these developments will be
associated with the existing HPAL projects in Morowali (where CATL is a joint venture partner) and Obi Island, or if they will lead
to new plants. LG’s consideration of operations in Maluku may further signal a link to Weda Bay, currently a producer of only
NPI. LG and CATL may ultimately end up in partnership with Antam, through a national battery company that is envisioned as
part of the current five-year plan (to 2023) of MIND ID, the state-owned company for the mining and metals industry.

New Saudi Arabian battery chemicals plant Developments are not entirely restricted to Asia, however, as Australia-based EV
Metals plans to build a US$2 billion chemicals and metals-for-batteries plant in Saudi Arabia. A memorandum of understanding
was signed with the National Industrial Development Centre (NDIC) at the end of 2020, under the auspices of the Kingdom’s
Vision 2030. Construction will take place in stages, initially to install a 25 ktpa lithium hydroxide plant, due by early 2025,
followed by other units to make nickel and cobalt sulphate, and cathode active materials.

US battery recycling coming In North America, greater nickel demand in the late 2020s from EV and energy storage batteries
is possible. Currently, our growth rate is low, moving up from less than 5 ktpa to almost double by the end of our forecast period.
But some lead indicators suggest greater regional interest in renewables for autos going forward. Upstream, there is a
committed handful of spent battery recyclers who will be producing the requisite range of clean metal sulphates by 2022-2024, if
financing can be put in place. They will look to supply makers of precursor and cathode active materials, and if these are made
in North America in greater volumes than they are today, this is where we would reflect growing nickel consumption by first use.
There are already cell and battery pack assembly facilities being established in North America which will initially be fed by
imported product. But the new rules of product origin under the USMCA also promote regional manufacturing to avoid tax
penalties on final auto assembly, so it is likely that those imported cells/packs could be replaced by domestically made units.

Page 14 of 21
Global nickel long-term outlook Q1 2021

Supply
Global refined nickel up by 5.3% a year to 2025 Refined nickel production is forecast to increase by 5.3% a year through to
2025, reaching 3.29 Mt by that time. Refined nickel then declines by 0.5% a year through to 2040 due to closures at several
large operations due to exhaustion of published reserves. Refined output at the end of our forecast period currently stands at
3.03 Mt.

Global mined nickel up 5.3% a year to 2025 Mined nickel production will reach 3.44 Mt by 2025, representing annual growth
of 5.3% a year. Mine production thereafter declines by 1.3% a year through to 2040, to leave mine output at 2.83 Mt by the end
of our forecast period.

Near-term changes in mined production capability, excluding probable projects (kt)

CAGR Prodn kt CAGR

2020 2021 2022 2023 2024 2025 2030 2035 2040 '20-2025 '20-2040 '20-2040
Indonesia 801 1025 1414 1518 1598 1624 1641 1641 1541 15.2% 740 2.9%
Philippines 413 361 364 364 364 364 337 337 337 -2.5% -76 -0.9%
Russian Federation 216 226 234 243 243 245 247 247 247 2.6% 31 0.6%
Canada 167 167 163 160 162 166 148 81 41 -0.2% -126 -5.9%
Australia 175 185 196 209 195 189 135 67 67 1.6% -108 -4.1%
New Caledonia 220 200 209 220 224 226 226 182 182 0.5% -38 -0.8%
Others 613 628 649 648 640 626 563 454 414 0.4% -199 -1.7%
Global Total 2605 2794 3229 3361 3425 3438 3297 3008 2829 5.7% 224 0.4%
Source: Wood Mackenzie

Global mined nickel production by region

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Global nickel long-term outlook Q1 2021

Near-term changes in refined production capability, excluding probable projects (kt)

CAGR Prodn kt CAGR

2020 2021 2022 2023 2024 2025 2030 2035 2040 '20-2025 '20-2040 '20-2040
China (incl NPI) 792 624 651 679 700 700 700 700 700 -2.4% -92 -0.5%
Japan 150 150 165 167 171 171 171 171 128 2.6% -22 -0.7%
Indonesia 638 882 1133 1215 1282 1296 1306 1306 1306 15.2% 669 3.2%
Norway 91 92 92 92 92 92 92 92 92 0.2% 1 0.0%
Russian Federation 155 131 138 146 151 153 155 155 155 -0.2% 0 0.0%
Canada 122 119 122 131 130 132 132 64 64 1.7% -58 -2.8%
Australia 116 118 115 115 110 110 110 70 70 -0.9% -45 -2.1%
Others 502 558 614 630 637 634 600 548 514 4.8% 13 0.1%
Global Total 2565 2674 3030 3175 3272 3288 3267 3106 3030 5.1% 466 0.7%
Source: Wood Mackenzie

Global refined nickel production by region

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Global nickel long-term outlook Q1 2021

Main changes once again tied to Indonesian NPI The primary change from our Q4-2020 LTO has one again been a
significant increase in Indonesian nickel-in-NPI production. Capacity additions at Weda Bay and Virtue Dragon, combined with
more modest rises at Tsingshan Indonesia, have resulted in an increase of over 310 kt to our mid- to long-term production
forecasts. Updated Chinese data and an evaluation of Nornickel's long-term plans also warranted revisions to our outlook for
Chinese chemicals and Russian metal, adding a further 40 ktpa to global primary production in the long term.

Main changes in refined nickel supply since the prior quarter

Asia
Indonesia
Indonesian production continues its extraordinary growth The below table details our production forecast for Indonesian
FeNi/NPI and the probable projects that may well bring even more material to market as early as next year.

It is worth noting that while we have a total of 28 lines in our base case outlook for Weda Bay, as many as 44 lines have been
suggested as being the ultimate scale. And perhaps while this seems incredible to contemplate, it is also astonishing that our
current forecast for 2026 is more than 500 kt greater than projected a year a go in our Q1 2020 LTO!

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Global nickel long-term outlook Q1 2021

Current Indonesian FeNi and NPI capacity and projects

Operation name 2021 2022 2023 2024 2025 2026

PT Sulawesi Mining Investment
PT Indonesia Guang Ching Nickel and Stainless Steel

214 214 214 214 214 214

PT Indonesia Tsingshan Stainless Steel

PT Tsingshan Steel Indonesia

PT Hengjaya Nickel 22 22 22 22 22 22
PT Ranger Nickel 22 22 22 22 22 22
Tsingshan Indo Ruipu Alloy 43 43 43 43 43 43
PT Cahaya Smelter Indonesia 22 22 22 22 22 22
PT Bukit Smelter Indonesia 22 22 22 22 22 22
PT Lestari Smelter Indonesia 43 43 43 43 43 43
Walsin Lihua 23 43 43 43 43 43
TOTAL IMIP 409 429 429 429 429 429
PT Yashi Indonesia Investment 42 43 43 43 43 43
Weda Bay Nickel 43 43 43 43 43 43
PT Youshan Nickel Indonesia 41 43 43 43 43 43
PT Langit Metal Industry 29 43 43 43 43 43
Other unidentified stakeholders 28 117 128 128 128 128
TOTAL IWIP 182 289 300 300 300 300
PT VDNI 100 100 100 100 100 100
PT Obsidian Stainless Steel 71 170 210 260 260 260
TOTAL VDNI/Obsidian 171 270 310 360 360 360
PT Megah Surya Pertiwi 25 25 25 25 25 25
PT Jinchuan WP 21 22 22 22 22 22
PT Huadi Nickel Alloy Indonesia 7 7 7 7 7 7
PT Huadi Nickel Alloy Indonesia (2nd phase) 18 28 32 32 32 32
PT Indoferro 6 6 6 6 6 6
PT Metalindo 4 4 4 4 4 4
PT COR Industri Indonesia/PT Macrolink Omega Adiperkasa 5 5 5 5 5 5
PT Bintang Timur Steel 2 2 2 2 2 2
TOTAL Ni in NPI 851 1087 1142 1192 1192 1192
PT Aneka Tambang (Persero) Tbk 25 25 25 25 25 25
Haltim Ferronickel Plant (P3FH) 6 12 13 13 13 13
PT Ceria Nugraha Indotama 3 12 12 12
TOTAL Ni in FeNi 31 37 41 50 50 50
IMIP - Other unidentified stakeholders 6 30 40 40 40
Lygend Obi 30 63 63 63 63
PT Ceria Nugraha Indotama 1 20 36
Total Probable Projects 36 93 104 123 139
Source : Wood Mackenzie

Page 18 of 21
Global nickel long-term outlook Q1 2021

Indonesian nickel in NPI production by company

Tsingshan to produce nickel matte On 3 March, Tsingshan announced that it will provide 100 kt of nickel matte (75 kt nickel)
from its facilities in Indonesia to CNGR and Huayou, to produce nickel sulphate and EV batteries. The “big news” was that the
nickel matte would be produced instead of NPI, by using modified facilities – and indeed the matte would only be produced if
market conditions were favourable to do so.

It has been known for a while that several potential matte producers had been working on the “conversion” to matte – essentially
achieved by the addition of sulphur in the calciner/furnace or subsequently to the molten NPI in a converter to remove iron and
replace it with sulphur – and that at some point this would be brought to the market.

Perhaps more interesting was Tsingshan’s statement of indicated company production of 1.1 Mt of nickel in NPI by 2023 (see
the Inform “NPI-to-matte conversion, part 2: some implications”). The net implication of this is that, if the numbers are correct
and with demand and prices permitting, the market could see not only 75 kt nickel in matte going to battery producers in 2021-
2022, but possibly almost three times that quantity by 2023.

For the present we have not assumed any nickel-in-matte production and have maintained all of the nickel units as nickel in NPI.
We will adjust the outlook as data becomes available.

Africa
Tanzania
Framework signed for Kabanga development The Kabanga nickel deposit in Tanzania is widely regarded as one of the best
undeveloped nickel sulphide deposits in the world. Stated resources in 2019 were 37.2 Mt grading 2.63% Ni, 0.35% Cu and
0.2% Co. Barrick Gold and Glencore lost the project in 2018 when the Tanzanian administration revoked their licence (along
with 10 others) as part of new mining laws and regulations. Kabanga Nickel (formerly LZ Nickel) will own 84% of the project
through a new joint venture which will hold the project, Tembi Nickel Corporation. By law, the Tanzanian government gets a
16% stake in all mining projects in the country.

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Global nickel long-term outlook Q1 2021

Kabanga Nickel will be granted a refinery licence and will use a hydrometallurgical route for processing nickel concentrate in
country. Processing through to finished metals is an option that was considered in the late 1990’s by then partner, Anglo
American, which indicated the potential to use Activox technology.

Kabanga’s remote location, in the far west of Tanzania, close to the Burundi border, has always been a major impediment to its
development. Consequently, it is almost 900 km to the coast before any concentrate can be loaded for export. This is one of the
reasons that producing metal on-site has been considered. However, the manufacture of a high value, saleable product then
brings security issues in getting the metal to the point of export. In our view, despite these positive developments, Kabanga is
still a long way from being developed.

North America
USA
Polymet wetlands permit suspended While the new energy secretary Jennifer Granholm is calling for the United States to
grow its mining and processing capabilities, Polymet are now further from potential production than 12 months ago. On 20
March, the US Army Corps. of Engineers suspended a wetlands permit for PolyMet, the company trying to open Minnesota's
first copper-nickel mine, while the Environmental Protection Agency reviews whether the proposed project "may affect" the
downstream Fond du Lac Band of Lake Superior Chippewa.

Polymet, should it get developed, would only produce around 3 ktpa nickel in concentrate as it is predominantly a copper mine.
However, having completed, in November 2015, what was stated at the time as “the Final Environmental Impact statement” and,
seemingly, having received all necessary permits by March 2019, the recent suspension reveals just how challenging mine
development in the US is. Thus, if the US intention is indeed to “grow its mining and processing capabilities” there are several
challenges ahead, not least convincing the populace of its necessity.

Page 20 of 21
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