Fitch Affirms Nickel Industries at 'B+'; Outlook Stable

(Fitch Ratings - Sydney - 25 Feb 2026)--Fitch Ratings has affirmed Nickel Industries Limited's (NIC) Long-Term Issuer Default Rating (IDR) at 'B+'. The Outlook is Stable. Fitch has also affirmed NIC's senior unsecured notes at 'B+' with a Recovery Rating of 'RR4'.

The affirmation reflects our expectation that NIC's leverage will decline in 2026 supported by its major Excelsior Nickel HPAL Project (ENC). The project should generate sufficient EBITDA to offset the impact on leverage from its USD210 million guarantee to Sphere Corp. We forecast EBITDA leverage will decline below 3.5x in 2026—the level at which Fitch may consider taking negative rating action—although there is limited headroom in the rating for any further deviation from our forecasts.

The Stable Outlook is supported by NIC's improving liquidity, which increased to USD357 million as of December 2025. This level appears sufficient to meet NIC's short-term debt amortisation of around USD100 million and the capital committed to the ENC acquisition, which has reduced to USD46 million following revision of the agreement with Shanghai Decent.

Key Rating Drivers

ENC Acquisition: Fitch treats NIC's USD210 million guarantee to Sphere as its debt that will increase EBITDA leverage by about 0.4x in 2026. However, NIC will assume an additional 10% interest in the ENC if Sphere defaults, which will reduce the overall impact on leverage. Fitch also expects NIC's free cash flow (FCF) to turn positive in 2026, which will improve NIC's deleveraging capacity, following a USD207 million reduction in NIC's commitments to acquire an additional interest in the ENC.

Shanghai Decent has completed reducing its stake in the ENC by selling 10% of the project to Sphere and agreed to NIC's commitment to acquire an additional 2% share in ENC, down from a previously agreed 11%. NIC will make a final payment of USD46 million by 31 March 2026 (USD253 million previously). Post-transaction, NIC's ownership in ENC will be 46% while Shanghai Decent will have 44%, and Sphere 10%. NIC agreed to guarantee Sphere's USD210 million loan used to fund its ENC stake purchase.

Leverage to Improve: Fitch estimates EBITDA leverage will improve to around 2.8x in 2026. Management guides first production at the ENC in 1H26, with a seven-month ramp-up to full capacity. The project will have flexibility to produce mixed hydroxide precipitate, nickel sulphate and nickel cathode, increasing NIC's ability to achieve higher blended prices by switching production to the commodity in highest demand. We expect ENC to deliver incremental attributable EBITDA of around USD200 million annually on average in 2026-2029 under Fitch price assumptions.

Fitch-calculated EBITDA leverage reached 6.1x in 2025, from 4.2x in 2024. The increase in leverage was largely due to soft nickel prices that reduced Fitch-calculated EBITDA to USD233 million from USD279 million in 2024.

Strong Cost Position, Self-Sufficiency: NIC has a solid cash cost position at its nickel pig iron (NPI) facilities and benefits from ownership of power stations at the Angel Nickel Project (ANI) and Oracle Nickel Project (ONI). The company also integrates the Hengjaya and Sampala mines, with the capacity to increase self-sufficiency of nickel ore feedstock for NIC's high-pressure acid leach (HPAL) and rotary kiln-electric furnace (RKEF) operations to 100%. This level of integration supported NIC's EBITDA margin at an average of 15% over the past two years, despite a 28% fall in nickel prices.

Elevated Regulatory Risks: NIC's rating incorporates its exposure to higher-risk mining jurisdictions, less-stable regulations, progressively increasing mining costs through the delayed renewal of the Kerja dan Anggaran Biaya Indonesian mining licence and raised royalty rates. We believe the changes would have a less material impact on companies like NIC due to its size and integration in downstream operations. However, the effect on NIC's credit profile could be greater if the impact of further regulatory reforms deviates from our expectations.

Sole Counterparty Exposure: Tsingshan has a commitment to buy all of NIC's NPI production. It also has equity interest and provides technical oversight and ancillary services within the ecosystem in the Indonesia Morowali Industrial Park (IMIP), which contains the majority of NIC's assets, including the ENC project. The reliance on Tsingshan highlights NIC's concentration risk, but we believe their interests are aligned.

Financial Data Limitations: Tsingshan is a private company for which we do not have detailed financial information. Still, we believe the risk of Tsingshan not meeting its obligations to NIC is captured in the rating. This is supported by the Tsingshan group of companies being the world's largest stainless-steel producer and NIC being a critical part of its supply chain. However, we believe NIC's reliance on Tsingshan may create contagion risk.

Peer Analysis

NIC's vertically integrated structure supports its strong cost position on the industry cost curve and high self-sufficiency, with around 60% of its nickel ore requirements mined internally. Its product mix is concentrated in NPI that is mostly used to produce stainless steel, but this is expected to improve over the medium term with the commissioning of the ENC project, which will produce nickel cathode and sulphate, along with cobalt. However, it also has a concentrated customer base, with a single offtaker for its NPI. This weakens NIC's business profile compared to its peers China Hongqiao Group Limited (BB+/Stable) and Cleveland-Cliffs Inc. (BB-/Stable), which have stronger diversification.

NIC generated EBITDA of USD256 million on average in 2024-2025, which is larger than that of Algoma Steel Group Inc. (B/Stable), but significantly smaller than that of China Hongqiao, JSW Steel Limited (BB/Rating Watch Positive), and Eregli Demir ve Celik Fabrikalari T.A.S (BB-/Stable). However, NIC operates with strong margins, reducing volatility in its cashflows.

NIC's financial profile weakened in 2025, driven by soft nickel prices and increased debt. However, its credit metrics remain comparable to JSW Steel's, which has also required large capex in a weak commodity price environment. We also expect NIC's leverage to improve in 2026.

Fitch’s Key Rating-Case Assumptions

Nickel spot prices of USD15,635 per tonne in 2026 and USD15,000 thereafter;

Cobalt spot prices USD36,250 per tonne in 2026 , USD30,000 in 2027, and USD25,000 thereafter;

NPI nickel equivalent price of around 75% to London Metal Exchange nickel prices on average in 2026-2029;

Stable production of NPI at Ranger Nickel (RNI), ANI, ONI and Hengjaya Nickel (HNI) in 2026-2029;

Capex on the ENC project of USD46 million in 2026, and first production in April 2026;

Fitch-calculated EBITDA margin of between 17% and 23% in 2026-2029.

Debt incorporates USD210 million guarantees and additional 10% in ENC earnings used as security for Sphere's loan

Corporate Rating Tool Inputs and Scores

Fitch scored the issuer as follows, using our Corporate Rating Tool (CRT) to produce the Standalone Credit Profile (SCP):

- Business and financial profile factors (assessment, relative importance): management (bb, lower), sector characteristics (bb, moderate), market and competitive positioning (b+, moderate), diversification and asset quality (b, higher), company operational characteristics (bb+, moderate), profitability (bbb+, lower), financial structure (b+, moderate), and financial flexibility (bb-, moderate).

- The quantitative financial subfactors are based on custom CRT financial period parameters: 20% weight for the historical year 2024, 30% for the forecast year 2025, 30% for the forecast year 2026 and 20% for the forecast year 2027.

- B+ to CC considerations apply in our analysis and result in no adjustment.

- The Governance assessment of 'Some Deficiencies' results in no adjustment.

- The Operating Environment assessment of 'bbb-' results in no adjustment.

- The SCP is 'b+'.

To derive the IDR:

Fitch made no adjustments to the SCP, resulting in an IDR of 'B+'

Recovery Analysis

The recovery analysis assumes NIC would be reorganised as a going concern in bankruptcy rather than liquidated. We assume a 10% administrative claim.

Our going-concern EBITDA estimate of USD450 million reflects our view of a sustainable, post-reorganisation EBITDA level on which we base the enterprise valuation, as well as the mid-cycle nickel price and stable lateritic nickel rotary kiln operations at HNI, RNI, ANI, ONI and the ENC commencing production in 2026.

We use a multiple of 5x to estimate a value for NIC, because of its geographical concentration in Indonesia, and smaller operational scale compared with global peers. This is despite stronger growth prospects following ENC's production commencement.

The going-concern enterprise value corresponds to a 'RR3' Recovery Rating for NIC's senior unsecured bonds after adjusting for administrative claims and secured credit facilities. Nevertheless, we rate the senior unsecured notes at 'B+' and 'RR4', because NIC's operating assets are in Indonesia. Under our Country-Specific Treatment of Recovery Ratings Criteria, Indonesia is classified under the Group D of countries in terms of creditor friendliness and Recovery Ratings are subject to a cap at 'RR4'.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:

-- A delay in the start of production at ENC, production underperformance, or other operational events resulting in EBITDA leverage remaining above 3.5x for a sustained period;

-- A decrease in EBITDA interest coverage to below 4.0x for a sustained period;

-- Weakened access to funding;

-- A weakening of Tsingshan's ability to make timely payments to NIC.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:

-- Our assessment of Governance remains at 'Some Deficiencies', but the company demonstrates an increase in production scale and improved customer diversification, alongside an improvement in EBITDA leverage to below 2.0x for a sustained period; or

-- Our assessment of Governance improves to 'Good' and the company demonstrates an increase in production scale and improved customer diversification, alongside an improvement in EBITDA leverage to below 2.5x for a sustained period.

Liquidity and Debt Structure

NIC's cash balance rose to USD357 million by end-December 2025 from USD145 million at end-June 2025. The improvement was driven by the placement of USD800 million of notes, with proceeds partly used for repayment of USD550 million of existing debt. This also helped to reduced debt amortisation payments for 2026 to around USD100 million, which are sufficiently covered by NIC's cash holdings.

Issuer Profile

NIC is a producer of Class 2 and Class 1 nickel, with four smelter assets and one mining asset in Indonesia. NIC's ownership interest in all four smelters, HNI, RNI, ANI and ONI, is 80%, with the remaining 20% owned by Shanghai Decent Investment Co., Ltd, a Tsingshan group company. NIC is progressing with the construction of the ENC, where the company's interest will be 46%. NIC also holds an 80% share in PT Hengjaya Mineralindo, a nickel and cobalt deposit in the Morowali area in Indonesia.

Sources of Information

The principal sources of information used in the analysis are described in the applicable criteria.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Sector Forecasts Monitor data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

Climate Vulnerability Signals

The results of our Climate.VS screener did not indicate an elevated risk for NIC.

ESG Considerations

Nickel Industries Limited has an ESG Relevance Score of '4' for Group Structure due to large related-party transactions with its major shareholder Tsingshan, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors.

Nickel Industries Limited has an ESG Relevance Score of '4' for Governance Structure due to low visibility on NIC's sole counterparty Tsingshan, which has a negative impact on the credit profile, and is relevant to the rating[s] in conjunction with other factors.

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores. (ends)