Indonesia HPAL Nickel Ore Costs Rise as New HPM Formula Hits Limonite Feedstock

Nickel ore

Indonesia HPAL nickel ore costs are set to rise sharply after the government’s revised mineral benchmark price lifted the mandated price floor for limonite ore. The new HPM formula is expected to increase limonite ore costs by at least 50%, adding immediate margin pressure to mixed hydroxide precipitate producers.

The revised HPM for limonite ore containing 1.2% nickel, 0.1% cobalt and 2% chromium is calculated at $45.24/wmt under the updated Harga Mineral Acuan. That is around 50% higher than early April transacted prices of about $30/wmt for 1.2% limonite ore.

Indonesia HPAL nickel ore costs are also far above the previous benchmark level. Under the old formula, the HPM for similar ore was only $17.17/wmt, meaning the new benchmark is nearly three times higher.

The change matters because HPAL operations rely on limonite ore as feedstock to produce MHP, which is used in battery-grade nickel and cobalt supply chains. A higher government-mandated ore floor will raise raw material costs, increase royalty payments and pressure margins across Indonesia’s battery nickel industry.

Limonite Ore Repricing Raises MHP Cost Pressure

The new HPM framework has the strongest impact on limonite ore because this material typically trades closer to benchmark values than saprolite ore. HPAL producers therefore face a more direct cost increase than rotary kiln-electric furnace operators.

MHP producers will now have to absorb higher ore purchase costs and higher royalties. Since royalties are linked to official valuation, the total cost increase could exceed the headline 50% rise in limonite ore pricing.

The revised formula also changes how Indonesia captures ore value. It includes cobalt, iron and chromium in nickel ore valuation, making these contained elements taxable. This is especially important for limonite ore because cobalt content adds value to HPAL feedstock.

The correction factor for cobalt is set at 30% when ore contains at least 0.05% cobalt. Iron carries a 30% correction factor when content is 35% or lower, while chromium carries a 10% correction factor.

This means Indonesia is no longer valuing nickel ore mainly by nickel grade. The government is moving toward a broader contained-metal pricing model, capturing more value from battery-related by-products and ore chemistry.

For MHP producers, this creates a structural cost problem. HPAL projects were built around access to Indonesian limonite ore, sulphuric acid and integrated processing infrastructure. If ore costs rise by more than a third to half, the cost floor for MHP production moves higher.

This could affect downstream nickel sulphate and cathode material economics. Producers with stronger integration, lower acid costs and better logistics will be better positioned. Higher-cost operators may face squeezed margins if MHP prices do not rise enough to offset the new ore benchmark.

The change also comes as Indonesia tightens wider nickel policy. Mining quota uncertainty, export tax discussions and stricter pricing formulas all point to a broader state strategy of capturing more mineral value before material moves downstream.

Sulphuric Acid Tightness Adds a Second Cost Shock

Indonesia HPAL nickel ore costs are rising at the same time as sulphuric acid prices surge. This creates a double pressure point for MHP producers.

HPAL operations require large volumes of sulphuric acid to leach nickel and cobalt from limonite ore. Any disruption in sulphur or acid supply directly affects processing costs and production reliability.

The US-Iran conflict has stranded several sulphur cargoes bound for Indonesian HPAL producers, preventing them from transiting the Strait of Hormuz. As a result, producers have shifted toward buying sulphuric acid directly.

That market was already tight because of limited copper concentrate availability. Sulphuric acid supply is expected to tighten further as China suspends exports from May.

Southeast Asian sulphuric acid prices have risen sharply. Prices reached $277.50/t cfr on 9 April, up 71% from $162.50/t before the conflict.

This is a major issue for Indonesian HPAL plants. Higher limonite ore costs increase feedstock expenses, while higher sulphuric acid prices increase processing costs. Together, they raise the full cost of producing MHP and weaken the advantage of low-cost Indonesian battery nickel.

Saprolite ore faces less immediate disruption. Saprolite is mainly used in RKEF operations to produce nickel pig iron and ferronickel. Although the new HPM for typical saprolite ore containing 1.6% nickel, 18% iron and 2% chromium rises to $52.90/wmt from $29.94/wmt, it remains below early April transacted prices of about $70/wmt.

This means RKEF producers may see limited immediate transaction impact because market prices are already above the benchmark. HPAL producers, by contrast, face a direct reset of the cost floor.

The difference could reshape relative economics between Indonesia’s stainless-linked and battery-linked nickel chains. NPI producers remain supported by high saprolite prices, while HPAL producers now face rising limonite, royalty and acid costs.

For the global battery supply chain, the key risk is that Indonesia’s MHP cost curve shifts upward. That could support nickel sulphate prices over time, especially if acid tightness persists or HPM-linked royalty costs remain elevated.

For Indonesia, the policy strengthens resource rent capture. The government is recognising that limonite ore contains not only nickel but also cobalt and other valuable elements. This gives Jakarta a stronger fiscal claim over battery material feedstock.

However, the policy also increases operating uncertainty. HPAL investors need predictable ore pricing, acid availability and tax treatment to justify large-scale expansion. A sharp change in HPM could force producers to revisit cost assumptions, procurement strategies and product pricing.

The Metalnomist Commentary

Indonesia’s new HPM formula marks a turning point for HPAL economics. The country is capturing more value from limonite ore, but the combined shock of higher ore prices, royalties and sulphuric acid costs could reset the cost floor for global MHP supply.

Nickel Industries HPAL Expansion Targets Indonesian MHP Growth Through Acquisitions

Tsingshan

Nickel Industries HPAL expansion will move forward through acquisitions rather than new project development as Indonesia tightens control over additional high pressure acid leach capacity. The Australian producer will acquire stakes in two MHP projects next to its existing Excelsior Nickel Cobalt operation in Central Sulawesi.

Nickel Industries HPAL expansion is strategically important because Indonesia has stopped issuing licences for new HPAL developments since late 2025, according to the company. That makes existing permitted projects increasingly valuable to producers seeking battery-grade nickel growth.

Nickel Industries HPAL expansion covers the planned Teluk Metal Industry and Chengsheng New Energy projects. Together, the stakes would give NI attributable MHP capacity of almost 17,000 t/yr.

Both projects are located in the Indonesia Morowali Industrial Park and will use ore from NI’s Sampala mine. Their output will feed the electric vehicle battery supply chain.

TMI and CNE Add MHP Capacity Around Existing ENC Platform

NI will pay $169mn for a 17.5% stake in the Teluk Metal Industry HPAL project. TMI has planned nameplate MHP capacity of 38,640 t/yr, giving NI 6,775 t/yr of attributable output.

The transaction also carries construction protection from Tsingshan. The Chinese nickel and stainless steel producer has guaranteed that NI’s investment will be capped at $169mn and that TMI will reach nameplate production by September 2027.

This lowers construction risk for NI and reinforces its relationship with Tsingshan, which already owns an indirect 44% stake in the ENC project.

TMI’s remaining ownership includes Singapore-based Sumber International Investment and a South Korean-Japanese consortium involving LS MnM, Hanwa and another strategic investor. The structure shows how Asian industrial groups are positioning themselves around Indonesian battery nickel supply.

NI is also pursuing a 36% stake in the Chengsheng New Energy HPAL project together with a local partner. The acquisition will be funded by transferring 30% of their combined ownership in the Sampala nickel mine.

CNE has MHP capacity of 28,357 t/yr, with 10,208 t/yr attributable to NI. Commissioning is expected by mid-2027.

The CNE transaction still requires shareholder approval because an NI director is associated with the selling investment firm. That adds a governance step before completion.

Indonesia Licensing Limits Increase Value of Existing HPAL Assets

Indonesia’s decision to stop issuing new HPAL licences changes the economics of nickel expansion. Producers can no longer rely on greenfield development to add battery-grade processing capacity.

This gives existing permitted projects a scarcity premium. Companies seeking growth must acquire stakes, partner with current licence holders or expand existing operations.

For NI, TMI and CNE extend the company’s battery nickel platform around ENC. The 46%-owned ENC project is preparing to produce nickel cathode and nickel sulphate, giving NI exposure further downstream than MHP alone.

The strategy also integrates mining and processing. Ore from the Sampala project will supply both TMI and CNE, linking captive feedstock with HPAL conversion and battery-material output.

That integration matters because Indonesia’s nickel industry is increasingly constrained by ore availability, regulatory approvals and government efforts to manage oversupply.

The policy shift could support nickel prices by slowing future HPAL growth. But it also raises the value of projects already holding development rights.

For NI, acquisitions therefore become more than a growth option. They are now the main route to expanding Indonesian MHP production under a tighter licensing regime.

The Metalnomist Commentary

Indonesia’s HPAL licensing freeze is turning permitted projects into strategic assets. Nickel Industries is responding by buying access to existing capacity, showing how policy can shift competition from project development to asset acquisition.

Nickel Industries HPAL Expansion Targets More Indonesian MHP Supply

Nickel Ore

Nickel Industries HPAL expansion will add stakes in two Indonesian high-pressure acid leach projects next to its existing Excelsior Nickel Cobalt operation in Central Sulawesi. The acquisitions give the company access to additional mixed hydroxide precipitate capacity for the electric vehicle battery market.

Nickel Industries HPAL expansion comes as Indonesia restricts new HPAL project development. The government stopped issuing new licences in late 2025, making acquisitions of existing permitted projects increasingly important for producers seeking growth.

Nickel Industries HPAL expansion covers the Teluk Metal Industry and Chengsheng New Energy projects, both located in the Indonesia Morowali Industrial Park. Together, the transactions could add nearly 17,000 t/yr of attributable MHP capacity to Nickel Industries.

The strategy deepens the company’s downstream exposure beyond nickel ore and conventional smelting into battery-grade nickel intermediates, nickel sulphate and cathode production.

HPAL Licence Restrictions Increase the Value of Existing Projects

Nickel Industries will pay $169mn for a 17.5% stake in the planned Teluk Metal Industry HPAL project.

TMI has nameplate MHP capacity of 38,640 t/yr. Nickel Industries’ equity share will provide around 6,775 t/yr of attributable production.

Tsingshan has provided a construction guarantee covering the project, capping Nickel Industries’ investment at $169mn and targeting nameplate production by September 2027.

The company will also gain exposure to the Chengsheng New Energy project through a separate transaction involving equity in its Sampala nickel mine.

CNE has MHP capacity of 28,357 t/yr, with around 10,208 t/yr attributable to Nickel Industries. Commissioning is expected by mid-2027.

The two acquisitions are especially valuable because Indonesia is no longer approving new HPAL developments. This effectively raises the strategic value of existing permits and projects already in development.

For producers seeking to expand battery-nickel capacity, buying into permitted facilities may now be more realistic than pursuing greenfield HPAL projects.

MHP Growth Strengthens Battery-Nickel Integration

Both TMI and CNE will operate alongside Nickel Industries’ 46%-owned Excelsior Nickel Cobalt project in the Morowali industrial complex.

ENC is expected to produce nickel cathode and nickel sulphate, extending the company further downstream into products used in battery supply chains.

TMI and CNE will produce MHP using ore from the Sampala project, strengthening the link between mine supply and downstream processing.

This integration can improve control over ore quality, operating costs and feedstock availability.

Indonesia’s policy shift also suggests that future nickel growth may become more concentrated among producers that already control mines, processing infrastructure and approved HPAL projects.

That could slow the pace of new supply while strengthening larger integrated groups with existing licences and partnerships.

For the global battery market, the acquisitions reinforce Indonesia’s central role in nickel intermediates even as Jakarta tries to limit oversupply and support prices.

The Metalnomist Commentary

Indonesia’s HPAL restrictions are turning existing licences into strategic assets. Nickel Industries is responding by buying into permitted projects, allowing it to expand battery-grade nickel supply without relying on new greenfield approvals.

Nickel Industries Indonesian Output Shows Ore Pressure Despite HPAL Growth

Nickel Industries, Indonesian

Nickel Industries Indonesian output was mixed in the first quarter as lower mining volumes and declining nickel grades contrasted with higher nickel pig iron and mixed hydroxide precipitate production. The Australia-based producer reported weaker ore output but stronger downstream processing across its Indonesian RKEF and HPAL assets.

Nickel Industries Indonesian output reflects the increasingly complex operating environment for nickel producers in Indonesia. Mining permits, ore grades, sulphur availability and downstream ramp-up timing are all shaping production performance.

Nickel Industries Indonesian output also shows why Indonesia’s nickel market can no longer be viewed only through capacity additions. Feedstock access and ore quality are becoming just as important as new processing plants.

Total nickel ore production fell by 30% from a year earlier to 3.96mn wet metric tonnes in January-March. However, output almost tripled from the previous quarter after mining activity recovered from RKAB quota delays late last year.

RKAB Quota Recovery Supports Ore Flow but Grades Weaken

Nickel Industries received 14.3mn wmt of 2026 RKAB nickel ore quota this year. This was 36% higher than its total approved quota of 10.5mn wmt in 2025.

The higher quota helped production recover from the December quarter, when mining was disrupted by RKAB delays. The company also plans to apply for additional RKAB quotas later this year.

The Hengjaya mine supplies ore to Nickel Industries’ RKEF and HPAL plants. These facilities produce nickel pig iron for stainless steel markets and mixed hydroxide precipitate for battery material supply chains.

Total NPI output from the Hengjaya, Ranger, Oracle and Angel RKEF operations rose by 4.4% year on year and 1.7% quarter on quarter to 274,086t.

However, nickel-contained production fell to 30,264t because the average nickel content of NPI dropped to 11% from 12.1% a year earlier. This is a critical signal for margins because lower grades reduce metal output even when furnace volumes rise.

The result shows how Indonesian nickel producers face a tightening relationship between ore availability and processing efficiency. Higher RKEF output does not automatically mean stronger nickel production if feedstock grades weaken.

HPAL Growth Continues as ENC Start-Up Moves to Second Quarter

Nickel Industries’ Huayue Nickel Cobalt HPAL project produced 21,526t of nickel and 2,370t of cobalt in MHP form during the first quarter. Nickel output rose by 1.7% from a year earlier, while cobalt output increased by 23%.

This growth strengthens Nickel Industries’ exposure to battery materials. MHP remains a key intermediate product for nickel sulphate and other battery chemical supply chains.

The company’s next major step is the Excelsior Nickel Cobalt HPAL project. Commissioning has been delayed to the second quarter, with full ramp-up targeted by the end of October.

ENC had previously been expected to start commissioning in the first quarter. The delay matters because HPAL projects are technically complex and depend on stable feedstock, acid supply, utilities and commissioning discipline.

Nickel Industries said it has enough sulphur inventory to support ENC’s ramp-up until the third quarter. The company previously bought sulphur at an average price of $450/t.

Sulphur availability is now a strategic issue for HPAL producers. Any disruption in sulphur or sulphuric acid supply can raise costs and slow production growth across Indonesia’s battery nickel chain.

The company also plans to list nickel cathode produced at ENC on both the London Metal Exchange and Shanghai Futures Exchange. Exchange approval would support market acceptance and improve the project’s commercial flexibility.

Nickel Industries increased its stake in ENC by 2% for $46mn on 1 April, lifting its interest to 46% and making it the project’s largest shareholder. This gives the company greater exposure to Indonesia’s move from NPI and MHP toward Class I nickel products.

The broader implication is clear. Nickel Industries is moving across the Indonesian nickel value chain, from ore mining and RKEF production into HPAL, MHP and exchange-deliverable cathode.

The Metalnomist Commentary

Nickel Industries’ quarter shows that Indonesia’s nickel growth is becoming more constrained by ore quality, RKAB permits and sulphur logistics. Capacity still matters, but the winners will be producers that control feedstock, manage HPAL complexity and secure recognised Class I nickel routes.

Indonesia Nickel Pricing Sets Floor and Ceiling as HPAL Costs Rise

Huafei Nickel Cobalt

Indonesia nickel pricing is increasingly defining the global nickel market as ore quotas, benchmark pricing rules and sulphuric acid availability reshape supply economics. UK broker Sucden Financial said Indonesia is now setting both the floor and ceiling for nickel prices.

Indonesia nickel pricing has moved the market away from a simple oversupply story. The key question is no longer only how much nickel Indonesia can produce, but how tightly Jakarta chooses to manage supply.

Indonesia nickel pricing is also becoming more important because HPAL producers face rising costs for ore, sulphur and sulphuric acid. These inputs directly affect mixed hydroxide precipitate production, which feeds battery-grade nickel supply chains.

The London Metal Exchange nickel price settled at $19,500/t on Wednesday, while Sucden said Indonesia’s current policy stance is creating a firmer floor around $18,000/t. But upside may also be capped if higher prices encourage new quota approvals.

Indonesia Turns Ore Policy Into Market Control

Indonesia remains the central force in nickel because it controls the largest source of new supply. In recent years, Indonesian output growth, large exchange stocks and Chinese-linked processing capacity defined the market.

That structure is now changing. Sucden said Indonesia appears focused on supporting prices and discouraging weaker producers, rather than allowing unrestricted supply growth.

The country has reduced 2026 ore quotas by around 30% year on year. It has also revised its domestic benchmark ore pricing system, strengthening the link between ore valuation, contained metals and producer costs.

This policy approach gives Indonesia unusual pricing power. If supply is restricted, the market finds a firmer floor. If prices rise too far, Indonesia can relax quotas and allow more material through the system.

That means nickel’s upside is managed. Sucden warned that the market should become more cautious near $20,000/t, where additional supply approvals and producer hedging could begin to limit further gains.

This is why Indonesia now acts as both support and restraint. It can tighten ore availability to stabilise prices, but it can also prevent a strong rally from damaging downstream competitiveness.

The result is a more policy-driven nickel market. Traditional inventory and demand indicators still matter, but Jakarta’s quota and ore pricing decisions are now central to global price formation.

HPAL Costs Expose Battery Nickel Supply Risk

HPAL production is becoming the second major driver of nickel pricing. Unlike nickel pig iron and ferro-nickel, HPAL is highly dependent on sulphur and sulphuric acid.

This makes battery-grade nickel supply more vulnerable to chemical input availability. HPAL plants need stable acid supply to process limonite ore into MHP, and Indonesia’s inventory buffers are relatively tight.

Huayou’s decision to place half of its Huafei Nickel Cobalt MHP capacity into temporary care and maintenance from 1 May shows how quickly reagent costs can affect production. The company cited elevated sulphur costs and prolonged high operating rates.

The HPAL sector now faces a double squeeze. Ore prices are rising because of Indonesia’s revised pricing framework, while sulphur and sulphuric acid costs are increasing because of tighter chemical supply.

This changes the nickel cost curve. Producers with secure ore, sulphur access and integrated infrastructure can operate more defensively. Those relying on external feedstock or exposed to high reagent prices face greater margin pressure.

The shift also matters for battery supply chains. MHP is a key intermediate for nickel sulphate and other battery chemicals. If HPAL margins weaken, battery-grade nickel output can become less responsive than headline capacity numbers suggest.

Sucden said tighter nearby spreads and higher trading volumes may indicate increased hedging and another shift in market balance. That suggests producers and traders are adjusting to a market where costs and policy now matter more than simple surplus.

Nickel is still not structurally tight like copper. But it is no longer a market where oversupply alone explains price direction. Indonesia’s supply discipline and HPAL cost inflation are giving nickel a stronger base, even if the rally remains capped.

The Metalnomist Commentary

Indonesia has turned nickel into a managed market where policy controls supply and chemistry controls cost. The winners will be producers with secure ore, acid access and enough balance-sheet strength to survive Jakarta’s tighter discipline.

Indonesia’s Nickel Ambitions Face Obstacles Amid HPAL Expansion

HPAL

Indonesia is poised to increase its nickel production in the coming years, primarily by boosting its high-pressure acid-leaching (HPAL) capacity. However, this ambitious plan faces significant hurdles, notably the scarcity of sulphuric acid and challenges in managing tailings waste effectively. Despite these concerns, production is still expected to grow, even as the global nickel market anticipates a surplus.

Sulphuric Acid Supply and Tailings Management: Key Challenges

The HPAL process relies heavily on sulphuric acid to extract nickel and cobalt from ore, producing mixed hydroxide precipitate (MHP), which is essential for downstream nickel sulphate and battery production. Indonesia is projected to produce between 325,000 to 345,000 tons of MHP this year, a jump from 269,000 tons in 2023. With several new MHP projects on the horizon, output is expected to rise significantly, potentially tripling to 800,000-900,000 tons by 2026, as highlighted by Indonesia's Deputy Minister Septian Hario Seto during a recent metal industry event in London.

The increase in MHP production will necessitate more nickel ore and sulphuric acid, raising concerns about the sustainability of limonite ore supplies, which could deplete quickly like saprolite ore, currently used for nickel pig iron and matte production. The Indonesian government plans to address these issues with industry stakeholders.

Currently, Indonesia's four operational HPAL facilities—Huayou's Huayue and Huafei projects, GEM's QMB project, and Lygend's HPAL project—have been importing sulphuric acid primarily from China and South Korea. However, the rising cost has led some producers, such as Halmahera Persada Lygend, to switch to cheaper sulphur alternatives. The startup of new smelters, like Freeport McMoran's Manyar in Java and AMNT's copper smelter in Nusa Tenggara, is expected to add 3 million tons per year of acid capacity by 2025, potentially easing supply pressures.

Another critical issue is the proper disposal of tailings waste, which has come under increased scrutiny due to environmental, social, and governance (ESG) standards. The HPAL process generates substantial amounts of waste, with energy consultancy Wood Mackenzie estimating 1.4-1.6 tons of tailings per ton of nickel produced. Three disposal methods—tailings dams, deep sea disposal, and dry stacking—each have their risks, with dry stacking viewed as the more sustainable option. Yet, Indonesia’s wet climate and seismic activity pose challenges for safe waste storage.

To ensure the successful expansion of its HPAL production, Indonesia must secure a stable supply of sulphuric acid and implement sustainable methods for managing tailings waste. Addressing these issues is critical for maintaining the momentum in the country’s nickel production growth while adhering to stricter ESG standards.

Indonesia HPM Formula Raises Nickel Ore Cost Risk for HPAL Producers

ESDM

Indonesia HPM formula changes will reshape nickel ore pricing from 15 April, adding new cost pressure across the country’s nickel processing chain. The energy and mineral resources ministry revised the mineral benchmark price mechanism for nickel and aluminium ore, with nickel valuation now expanded beyond nickel content alone.

The Indonesia HPM formula raises the correction factor for 1.6% nickel ore to 30%, compared with the previous 20% correction factor for 1.9% ore. Under the new framework, the correction factor rises or falls by one percentage point for every 0.1% change in nickel content.

This means the correction factor for 1.9% nickel ore will rise to 33%. The change increases the official value of nickel ore and could raise taxes, royalties and feedstock costs for processors that rely on HPM-linked transactions.

The Indonesia HPM formula also adds cobalt, iron and chromium into ore valuation. This is a major policy shift because these contained elements were not previously priced in the same way. Indonesia is now moving toward a more complete ore-value model, especially for laterite ores used in battery and stainless steel supply chains.

Cobalt, Iron and Chromium Inclusion Changes Nickel Ore Valuation

Indonesia’s new nickel HPM framework gives cobalt a correction factor of 30% when ore contains at least 0.05% cobalt. This is particularly important for high-pressure acid leach producers because cobalt-bearing ore can generate additional value through mixed hydroxide precipitate.

The ministry also introduced a 10% correction factor for iron when ore contains 35% or less iron. Chromium content also carries a 10% correction factor. These additions make ore valuation more complex and link pricing more closely to the full chemistry of laterite deposits.

The inclusion of cobalt is the most strategically important change. Indonesia’s HPAL projects produce nickel-cobalt intermediates for battery supply chains, and cobalt content can materially affect project economics. By taxing cobalt-bearing value inside ore, Jakarta is capturing more upstream rent from battery-linked mineral flows.

The Indonesia HPM formula therefore moves beyond a simple nickel-grade benchmark. It pushes the country toward a broader mineral-value system that recognises by-product metals and secondary contained value.

The ministry kept the Harga Mineral Acuan reference price unchanged. This means the immediate policy impact comes from correction factors and added contained elements, rather than a change in the headline reference price.

Market participants are now assessing how the new rules will pass through to actual transactions. For nickel ore used in rotary kiln-electric furnace production, spot prices remain nearly double the HPM level. This limits the immediate impact on some stainless-linked ore trades because market prices already sit well above the official benchmark.

The impact is likely to be much stronger for HPAL ore. Ore used in HPAL processing often trades without the same premium seen in RKEF feedstock. As a result, the revised HPM formula could lift transacted HPAL ore prices by more than a third.

That cost increase would move directly into battery-grade nickel economics. Market participants estimate that higher ore prices and taxes could raise mixed hydroxide precipitate production costs by more than $1,000/t in nickel metal equivalent.

This matters because Indonesia has become the centre of global MHP supply growth. Chinese-backed HPAL projects rely on Indonesian ore, sulphuric acid, energy and logistics to supply nickel and cobalt intermediates to global battery chains. Higher ore costs could narrow margins across MHP, nickel sulphate and cathode material supply.

The change also arrives during a period of wider nickel policy uncertainty. Indonesia has been tightening mining quotas, reviewing export taxes and seeking greater value capture from its mineral resources. The revised HPM formula fits that direction by increasing government control over pricing and taxable value.

Nickel Policy Shift Extends to Bauxite and Signals Broader Resource Control

Indonesia’s pricing reform did not stop at nickel. The ministry also revised the HPM formula for bauxite, changing the price basis to dollars per wet metric tonne from dollars per dry metric tonne.

The bauxite change adds a silica discount and raises the correction factor to $1.40/wmt for each one percentage point increase in aluminium oxide content. The previous formula used $1/dmt. This changes how moisture and ore quality are reflected in benchmark pricing.

The ministry also changed the price basis for lead ore to dollars per wet metric tonne from dollars per dry metric tonne. This effectively removes moisture content from the pricing formula and simplifies the benchmark around wet material values.

These changes suggest a broader policy direction. Indonesia is refining benchmark pricing across mineral commodities to improve tax collection, capture more contained value and align official pricing with ore quality.

For nickel, the change has immediate market significance because Indonesia dominates global laterite supply. Nickel ore pricing affects stainless steel, ferronickel, nickel pig iron, MHP, nickel sulphate and battery cathode supply chains.

The Shanghai Futures Exchange nickel price response showed that traders are treating the policy as price-supportive. Nickel closed at Yn136,900/t after rising from Yn133,010/t on 3 April, with participants citing support from the revised HMA-linked pricing framework.

However, the real market impact will depend on how producers, smelters and government agencies implement the rules. If HPM-based taxes rise sharply while spot ore prices remain high, margin pressure could build across processors with weaker cost positions.

HPAL producers are the most exposed because their feedstock pricing may move more directly with the revised benchmark. RKEF operators may see less immediate change because their ore costs already reflect strong market premiums.

For battery materials buyers, the risk is that Indonesia’s cost base becomes more expensive even as global nickel markets remain oversupplied. Higher ore valuation may not tighten physical supply immediately, but it can raise the floor for production costs in one of the world’s most important nickel processing hubs.

For Indonesia, the policy strengthens resource sovereignty. The government is using pricing formulas, mining quotas, export controls and tax compliance to ensure that more mineral value stays inside the country. This could support domestic revenue and downstream investment, but it may also increase uncertainty for processors and foreign investors.

The new framework also creates a precedent. If Indonesia successfully captures more value from cobalt, iron and chromium in nickel ore, other resource-rich countries may consider similar contained-metal pricing models.

The Metalnomist Commentary

Indonesia’s revised HPM formula shows that nickel policy is moving from volume control to value capture. The biggest impact will fall on HPAL producers, where cobalt-bearing ore valuation could raise MHP costs and change battery nickel economics.

BSE On-Spec MHP Output Marks a New Step in Indonesia’s Nickel Battery Chain

Harum Energy

BSE on-spec MHP output marks an important commissioning milestone for Indonesia’s battery materials industry. Blue Sparking Energy has now produced qualified mixed hydroxide precipitate at its HPAL plant in Weda Bay Industrial Park. That confirms the project has moved beyond early trial production into a more advanced operating stage. As a result, BSE on-spec MHP output strengthens confidence in another major Indonesian downstream nickel asset.

This matters because MHP remains a critical intermediate product for the battery supply chain. BSE’s plant has nameplate capacity of 67,000 t/yr of nickel in MHP and 7,500 t/yr of cobalt. Those are meaningful volumes for a project that only began trial production in late November 2025. Therefore, BSE on-spec MHP output signals that new capacity in Indonesia is still moving forward despite a crowded nickel market.

The achievement also matters at the industrial park level. BSE is now the second MHP producer operating in IWIP after Huafei. That adds another layer of downstream conversion inside one of Indonesia’s most important nickel processing hubs. Consequently, Weda Bay MHP production is gaining more depth and scale.

Indonesia HPAL Plant Commissioning Is Advancing Toward Stable Operations

The Indonesia HPAL plant operated by BSE now appears closer to commercial readiness. Producing on-spec material is one of the most important steps in any HPAL commissioning cycle. It shows the process can deliver product quality that meets market requirements. Therefore, the milestone matters more than a simple trial output update.

HPAL projects are rarely judged only by design capacity. They are judged by whether they can ramp safely, consistently, and within product specification. BSE began construction in late December 2023 and initially targeted early 2026 for commercial operations. As a result, this update suggests the plant is moving broadly in line with that schedule.

This progress also reinforces Indonesia’s commitment to downstream nickel conversion. The country has built strong momentum in NPI, matte, and now MHP capacity. However, each new HPAL success still matters because technical execution remains difficult. Therefore, BSE on-spec MHP output is a useful operating signal for the wider market.

Weda Bay MHP Production Supports Harum’s Broader Downstream Strategy

Weda Bay MHP production also fits clearly into Harum Energy’s broader portfolio strategy. Harum already controls downstream assets through subsidiaries producing NPI and nickel matte. Adding qualified MHP output gives the group stronger exposure across multiple processing routes. Consequently, the company is building a more diversified nickel conversion platform.

That portfolio approach matters in the current market. Different nickel products serve different end markets, from stainless steel to battery chemicals. A producer with exposure to NPI, matte, and MHP can respond more flexibly to changing demand and pricing conditions. Therefore, BSE on-spec MHP output strengthens Harum’s strategic position, even in an oversupplied nickel environment.

The timing is also notable because more Indonesian battery-materials capacity is still coming. Harum also holds a stake in Nickel Industries, whose ENC project is preparing to add more nickel units through MHP, sulphate, and cathode production. As a result, BSE’s milestone is part of a broader wave of Indonesian downstream growth rather than a standalone event.

The Metalnomist Commentary

This milestone is important because it shows Indonesia’s nickel chain is still expanding deeper into battery materials. The real question now is not whether new HPAL projects can start. It is whether the market can absorb all this qualified downstream supply without further margin pressure.

NPI–Class I Nickel Spread Narrows as Metal Oversupply Pressures Prices

Nickel cathode

NPI–class I nickel spread narrowed sharply in March as persistent oversupply in the class I nickel market pushed metal prices lower, while nickel pig iron prices stayed supported by elevated production costs. The average spread fell to $2,975/t in March, down from the 2025 annual average of $3,696/t.

The narrower NPI–class I nickel spread shows how differently the two nickel markets are behaving. Class I nickel remains under pressure from high exchange stocks and weak absorption from battery and alloy users. NPI, by contrast, is being held up by Indonesian ore costs and a firmer production cost floor.

The current spread also discourages additional class I output from NPI conversion. Estimated conversion costs from NPI to class I nickel remain around $4,000/t, meaning producers using NPI as feedstock would face negative margins at current price levels.

This creates an important signal for the nickel supply chain. Oversupply is still weighing on refined metal, but high feedstock and processing costs are preventing prices from falling evenly across all nickel products.

Class I Nickel Oversupply Keeps Metal Prices Under Pressure

Class I nickel oversupply remains the main reason behind the compressed spread. London Metal Exchange nickel stocks reached 289,506t on 26 February, the highest level since May 2018.

Ample exchange inventory has pressured class I nickel prices and opened an import arbitrage window into China. China’s nickel imports rose by 18% in January-February as lower overseas prices made imported metal more attractive.

However, end-user demand has not been strong enough to absorb the surplus. Battery and alloy-sector consumption remained insufficient to clear the additional metal units, pushing Shanghai Futures Exchange nickel stocks higher.

SHFE nickel inventories rose to 65,764t on 10 April from 45,544t on 9 January. This inventory build shows that imports and domestic availability are running ahead of immediate consumption.

The oversupply problem is structural in the near term. New class I capacity has continued to emerge, while demand from stainless steel, batteries and specialty alloys has not grown fast enough to rebalance the market.

The NPI conversion route is therefore unattractive. When the NPI–class I nickel spread sits below conversion cost, producers have little incentive to turn NPI into refined metal. This helps prevent additional supply from that route, but it does not immediately remove existing class I oversupply.

NPI prices have been more resilient because they are tied closely to Indonesian ore economics. Indonesian nickel ore prices remain elevated and continue to trade above the government-mandated price floor.

Concerns over tight ore availability have supported feedstock values. This has limited NPI producers’ willingness to cut prices, even though stainless steel demand remains only average.

That cost floor is important. NPI is not rising because downstream demand is exceptionally strong. It is holding because ore, mining quotas and Indonesian pricing policy are preventing a deeper fall.

The result is a distorted market structure. Class I nickel is being pulled down by inventory pressure, while NPI is being supported by feedstock costs. This explains why the spread has narrowed despite weak overall nickel sentiment.

MHP and HPAL Costs Could Rebuild the Spread Over Time

Mixed hydroxide precipitate is becoming the more important cost driver for future class I nickel production. Much of the newly added class I capacity relies on MHP feedstock rather than NPI.

Integrated producers with their own Indonesian MHP capacity have a cost advantage. Their MHP production costs are estimated at around $13,000/t in nickel metal equivalent, with conversion costs from MHP to metal at roughly $3,000/t.

This places the total cost of class I production through the MHP route at about $16,000/t. That cost base can still support production for integrated operators, but it leaves less room for producers relying on third-party MHP.

The market problem is that MHP supply is not sufficient to meet all feedstock requirements for new class I capacity. This creates competition for MHP units and limits how much low-cost refined nickel can be produced through this route.

Cost pressure is also rising across HPAL operations. Middle East tensions have tightened sulphur availability and lifted sulphur prices, which directly affects MHP producers that rely on sulphuric acid-intensive processing.

Sulphur and sulphuric acid are central to HPAL economics. Any disruption to sulphur flows can raise operating costs, reduce margins or force producers to curtail output if acid availability becomes constrained.

Indonesia’s revised nickel ore pricing formula adds another layer of pressure. The new formula is expected to have a greater impact on ore consumed by HPAL projects than on ore used by rotary kiln electric furnace operations.

This is because HPAL ore often trades closer to official pricing levels, while RKEF ore used for NPI already trades at premiums well above the benchmark. As a result, HPAL producers may feel the revised HPM framework more directly.

Higher ore prices and higher taxes could lift MHP production costs. That would eventually raise the cost floor for class I nickel produced through the MHP route, especially for integrated producers that had previously enjoyed lower feedstock costs.

This cost inflation may support class I nickel prices over time. While current oversupply is weighing on metal values, producers cannot keep adding supply indefinitely if feedstock and conversion costs rise.

NPI prices are also likely to remain anchored by costs. Indonesian ore tightness, quota uncertainty and pricing reforms should continue to support NPI even if stainless steel demand stays moderate.

As MHP costs rise and NPI prices remain cost-supported, the NPI–class I nickel spread may widen back toward the $3,500-4,000/t range over time. That would restore a more normal relationship between feedstock products and refined metal.

However, the timing depends on inventory absorption. Class I nickel prices will struggle to recover strongly until exchange stocks stop rising and downstream demand improves.

For battery supply chains, the key issue is cost pass-through. If MHP and HPAL costs rise while class I prices remain weak, margins across nickel sulphate and cathode material chains could tighten.

For stainless steel producers, NPI resilience means raw material costs may remain sticky even without strong demand. This could limit margin recovery if finished stainless prices do not rise in parallel.

The nickel market is therefore entering a complex adjustment phase. Oversupply is pushing refined metal lower, while policy, ore availability, sulphur costs and HPAL economics are raising the cost floor beneath intermediate products.

The Metalnomist Commentary

The narrowing NPI–class I nickel spread is not a sign of healthy convergence. It reflects class I oversupply on one side and cost-protected NPI on the other. The next shift will likely come from rising HPAL and MHP costs, not from a sudden recovery in nickel demand.

Merdeka Nickel Ore Production Hits Target as Downstream Expansion Gains Pace

Merdeka Battery Materials

Merdeka nickel ore production reached its 2025 target as stronger mining capacity and better weather lifted output at Sulawesi Cahaya Mineral. MBMA produced 7mn wet metric tonnes of saprolite and 14.7mn wet metric tonnes of limonite during the year. Both results rose sharply from 2024. As a result, Merdeka nickel ore production now shows that upstream growth is still supporting Indonesia’s broader nickel strategy.

The scale of the increase matters because ore supply remains the foundation of Indonesia nickel downstream expansion. Saprolite output rose 42pc year on year, while limonite output increased 45pc. The company met its saprolite target and exceeded its limonite target. Therefore, Merdeka nickel ore production is giving the group a stronger base for its processing chain.

This performance also highlights the importance of operating conditions in Indonesian mining. MBMA said optimized mining activity and lower rainfall disruption supported the result. That means the production gain did not come from capacity alone. Consequently, Merdeka nickel ore production reflects both better execution and more favorable site conditions.

Indonesia Nickel Downstream Expansion Still Shows Uneven Product Performance

Indonesia nickel downstream expansion remains the central strategic story for MBMA, but 2025 results showed a mixed product picture. The company’s downstream portfolio includes NPI, high-grade nickel matte, and mixed hydroxide precipitate. Each product line moved differently over the year. As a result, MBMA nickel output was not uniformly strong across the chain.

NPI production fell 10pc to 73,871t in nickel metal equivalent because of maintenance at the RKEF smelters. Even so, the result still landed inside the company’s guidance range. That suggests NPI operations remained resilient despite maintenance pressure. Meanwhile, high-grade nickel matte output fell much more sharply, dropping 60pc to 19,998t in nickel metal equivalent.

That matte weakness reflected a deliberate operating shift. MBMA halted HGNM production in the first quarter of 2025 and only restarted output in October after securing a new contract. Therefore, the lower HGNM result was not simply an operational failure. It also reflected a commercial reset inside the product mix.

HPAL Nickel Growth Is Becoming More Important for MBMA’s Next Phase

HPAL nickel growth is now becoming the most important part of MBMA’s medium-term outlook. The PT ESG HPAL plant, operated with Green Eco-Manufacture, produced 25,994t of nickel in MHP in 2025. That gives the company a stronger foothold in battery-linked nickel chemicals. Consequently, Indonesia nickel downstream expansion is moving deeper into higher-value processing.

The next growth driver is already under construction. The Sulawesi Nickel Cobalt HPAL project is expected to start commissioning in the second half of this year. With capacity of 90,000 t/yr of nickel in MHP, the project could materially change MBMA’s downstream profile. Therefore, HPAL nickel growth may become the main reason investors watch MBMA more closely in 2026.

The company’s new guidance supports that view. MBMA raised its 2026 ore production targets for both saprolite and limonite, while also lifting its HGNM target sharply. MHP output from PT ESG is also expected to rise. As a result, Merdeka nickel ore production is no longer just an upstream success story. It is increasingly the feed base for a much broader downstream buildout.

The Metalnomist Commentary

MBMA’s 2025 result shows that Indonesia’s nickel model still depends on strong ore delivery before downstream value can scale. The real takeaway is not just that ore targets were met. It is that HPAL and chemical capacity are becoming more central to the company’s future than traditional nickel products alone.

Nickel Industries RKAB Quota Secures Feedstock for Indonesian HPAL Expansion

RKAB

Nickel Industries RKAB quota approval gives the Australian producer a stronger feedstock position in Indonesia’s tightening nickel market. The company has secured a 2026 nickel ore quota of 14.3mn wet metric tonnes, supporting both its rotary kiln electric furnace operations and its expanding battery-grade nickel platform.

The approved quota represents a 36pc increase from the company’s 10.5mn wmt quota in 2025. Of the total, up to 6mn wmt of saprolite ore will supply Nickel Industries’ RKEF operations, while 8.3mn wmt of limonite ore will support feed requirements for the Excelsior Nickel Cobalt HPAL project.

Nickel Industries RKAB quota approval follows the company’s receipt of an environmental permit from Indonesia’s environment ministry. The AMDAL permit is valid for five years and could support a further quota increase to around 19mn wmt in 2026, giving the company room to apply for additional feedstock later this year.

ENC HPAL Project Raises Nickel Industries’ Battery Materials Exposure

The ENC HPAL project is central to Nickel Industries’ shift beyond ferronickel and nickel pig iron-linked operations. The project is expected to be commissioned in the first quarter and is designed to produce 72,000 t/yr of nickel in mixed hydroxide precipitate, nickel sulphate, and nickel cathode.

This matters because limonite ore availability is becoming increasingly strategic in Indonesia. HPAL plants require consistent limonite feed to produce MHP and downstream nickel chemicals for batteries. Any restriction in ore quotas can directly affect project ramp-up schedules, operating rates, and customer supply planning.

Nickel Industries RKAB quota approval therefore gives the company an advantage over producers facing sharper quota cuts. It also supports the company’s ability to position ENC as part of Indonesia’s growing battery materials supply chain, where nickel intermediate production remains a major source of global supply growth.

Indonesia’s Quota Tightening Keeps Ore Supply Risk High

Indonesia’s wider nickel market remains under pressure despite Nickel Industries’ higher quota. The government plans to cut the 2026 RKAB nickel production quota to 260mn-270mn t from about 379mn t in 2025. That reduction signals a more controlled policy environment and tighter ore availability across the sector.

The impact is already visible. Weda Bay Nickel reportedly saw its RKAB cut by 70pc to 12mn wmt this year, showing that quota approvals are becoming more selective. Producers with stronger environmental approvals and clearer downstream integration may be better positioned, while others face greater uncertainty.

Nickel Industries also experienced the operational risk of delayed approvals. Its nickel ore production fell 77pc year on year to 1.67mn wmt in October-December 2025 because of downtime linked to RKAB delays. The company has since resumed operations at Hengjaya and expects mine sales to recover, but the episode shows how regulatory timing can quickly affect Indonesian nickel output.

The Metalnomist Commentary

Indonesia’s nickel market is entering a more disciplined phase where permits, ESG compliance, and quota access matter as much as installed capacity. Nickel Industries’ approval is positive, but the wider RKAB tightening means ore security will remain one of the biggest risks for nickel and battery materials supply.

Lygend Indonesian Nickel Output Drives Sharp Profit Growth in 2025

Lygend Indonesia

Lygend Indonesian nickel output drove a sharp increase in the company’s revenue and profit in 2025. China’s major nickel producer reported revenue of 40.24bn yuan, or about $5.85bn, up 379% from a year earlier.

Net profit attributable to shareholders rose by 61% to 2.85bn yuan. The improvement reflected higher production from Lygend’s Indonesian nickel operations and stronger cobalt prices after export controls in the Democratic Republic of Congo tightened the cobalt market.

Lygend Indonesian nickel output also strengthened the company’s position across both battery and stainless steel raw material chains. Its Indonesian assets produce mixed hydroxide precipitate, nickel sulphate, cobalt sulphate and ferronickel, giving the company flexibility across demand cycles.

HPAL and RKEF Projects Lifted Nickel and Cobalt Volumes

Lygend’s Obi Island HPAL project operated at full capacity in 2025. The six-line facility produced 120,000t in nickel metal equivalent and 14,250t in cobalt metal equivalent during the year.

The HPAL project can produce mixed hydroxide precipitate, nickel sulphate or cobalt sulphate depending on market demand. This flexibility matters because battery materials markets can shift quickly between intermediate products and refined sulphate demand.

The company’s HJF phase I project also ran at nameplate capacity, producing 95,000t in nickel metal equivalent through rotary kiln electric furnace technology. Meanwhile, Lygend ramped up output at its KPS phase II project, which has nameplate capacity of 185,000 t/yr in nickel metal equivalent.

Cobalt Prices Helped Offset Rising Input Costs

Lygend benefited from higher cobalt prices because its MHP contains cobalt. The DRC’s cobalt export controls lifted cobalt market sentiment and increased the value of cobalt-bearing intermediates.

Cobalt prices more than doubled during 2025, rising to about $25/lb in December from around $11.5/lb in January. This gave Lygend additional revenue support from MHP sales.

The stronger cobalt contribution helped offset higher costs for sulphur, energy and other consumables. These inputs remain critical for HPAL operations, where sulphuric acid availability and cost can directly affect processing economics.

Lygend also received approval from Indonesia for sulphuric acid import quotas. This allows partial substitution of sulphur with sulphuric acid when needed, improving feedstock flexibility and supply chain resilience.

The Metalnomist Commentary

Lygend’s 2025 results show how Indonesia has become the operating center of China-linked nickel growth. The company’s advantage now comes from scale, HPAL flexibility and cobalt exposure, but sulphuric acid supply will remain a key cost variable.

Indonesia Nickel Mining Quota Approval Raises Ore Supply Uncertainty

ESDM

Indonesia nickel mining quota approvals for 2026 have reached only 190mn-200mn t so far, leaving the market below the government’s earlier signalled target of 260mn-270mn t. The slower approval process has increased uncertainty over nickel ore availability and future smelter operating rates.

The approved volume remains far below the 379mn t quota granted for 2025. Indonesia had already been expected to cut this year’s RKAB quota by about one-third, but the current approved level is still tighter than many market participants expected.

Indonesia nickel mining quota uncertainty matters because the country remains the world’s dominant nickel supply hub. Any shortage of approved mining volumes could raise ore prices, reduce feedstock availability and pressure nickel pig iron, ferronickel and HPAL operations.

RKAB Delays Could Tighten Nickel Ore Availability

The RKAB approval process is moving more slowly than expected, creating operational uncertainty for miners and smelters. Companies without confirmed 2026 RKAB approvals must halt mining after the 31 March cut-off, unless new approvals are granted.

The ESDM previously allowed nickel firms to continue mining using up to 25% of their 2026 production plan until 31 March. That temporary mechanism helped avoid an immediate supply shock, but the expiration of the allowance now increases pressure on companies still waiting for approval.

Several mining firms plan to submit fresh applications for higher quotas, with reviews expected in July. This means Indonesia nickel mining quota volumes could still rise later in the year, but near-term ore availability remains exposed to administrative timing.

Sulphur and Fuel Risks Add Pressure to HPAL Operations

Indonesia’s nickel industry also faces external supply risks from fuel oil and sulphur disruptions linked to Middle East instability. The issue is especially important for HPAL plants, which rely heavily on sulphuric acid production and energy-intensive processing.

The Middle East supplies about 75% of Indonesia’s sulphur imports. If sulphur or fuel oil availability tightens, HPAL producers may face higher operating costs or even output curtailments.

Imports may offset part of the nickel ore quota shortfall, but market participants do not expect overseas material to fully meet smelter demand. Some producers may therefore face reduced operating rates if domestic quota approvals remain limited.

Indonesia is also considering tighter compliance rules. Tax compliance may become a requirement for RKAB submissions from 2027, although it remains unclear whether this will affect the 2026 process.

The Metalnomist Commentary

Indonesia nickel mining quota delays show that policy administration can become a direct supply risk in the nickel market. The bigger issue is whether Indonesia can balance resource control, smelter demand and HPAL feedstock security without creating avoidable price volatility.

Nornickel Nickel Surplus Forecast Shrinks as Indonesia Supply Tightens

Nornickel

Nornickel nickel surplus forecast has been cut sharply for 2026 as Indonesian ore constraints, higher feedstock costs and sulphur shortages slow the supply growth that drove recent oversupply. The Russian producer now expects a marginal global surplus of around 20,000t, down from its previous forecast of 240,000t.

Nornickel nickel surplus forecast reflects a major shift in supply conditions. Global nickel production is expected to fall by 5% to 3.71mn t in 2026, marking the first annual decline in a decade, while demand is forecast to rise by 2% to 3.69mn t.

Nornickel nickel surplus forecast also places Indonesia at the centre of the market balance. Lower effective mining volumes, declining ore grades and sharply higher ore prices are tightening feedstock availability for NPI, HPAL and Class 1 nickel producers.

The adjustment follows a 2025 surplus of around 278,000t, when supply increased by 7% and demand rose by 6%. The market is therefore moving from structural oversupply toward a much tighter balance.

Indonesia Ore and Sulphur Constraints Reshape Supply

Indonesia mined around 320mn t of nickel ore in 2025 against an approved quota of 379mn t. For 2026, quotas are expected at around 300mn t, but actual mining could be closer to 270mn t if utilisation remains near 90%.

Lower ore grades further reduce contained nickel availability. Indonesian NPI production fell by 8% year on year in January-May, suggesting smelters are already feeling the impact.

Philippine ore imports could reach around 25mn t this year and offset part of the shortfall. However, Indonesia’s July quota review remains a critical market variable.

Ore economics are tightening as well. Indonesia’s revised pricing formula has doubled or tripled minimum ore prices for some grades.

Nornickel estimates the new system could add as much as $5,000/t to the cost of Class 1 nickel produced from Indonesian feedstock on a cathode-equivalent basis.

HPAL producers face another problem: sulphur.

Middle East disruption has pushed sulphur prices from around $300/t to above $1,000/t. HPAL operations require roughly 10-11t of sulphur for every tonne of nickel produced.

Indonesia sourced more than 75% of its sulphur imports from the Middle East in 2025, leaving battery nickel projects highly exposed to disrupted maritime supply.

Around one-third of HPAL capacity is currently idle, while HPAL production fell by 20% year on year in May.

Nornickel expects Indonesian NPI output to decline by 11% this year and mixed hydroxide precipitate production by 9%. Class 1 nickel supply is forecast to fall by 2%.

Demand Growth Stays Modest as Stainless Scrap Use Rises

Nickel demand is still growing, but not strongly enough to create a clear deficit.

Nornickel expects stainless steel nickel consumption to rise by only 1% this year. Chinese producers are using more scrap, reducing their need for primary nickel units.

China’s average stainless scrap share is expected to increase to 24% in 2026 from 19% in 2025. That change could keep Chinese primary nickel demand in stainless steel broadly flat at around 1.6mn t.

A higher share of 316 stainless partly offsets the scrap effect because 316 contains more nickel than 304. Chinese 300-series stainless output increased by 3% in the first five months of the year, while 200-series production rose by 11%.

Battery-related demand remains stronger.

China’s nickel sulphate output is forecast to rise by 15% to 421,000t of contained nickel in 2026 and reach 455,000t in 2027. Indonesian nickel sulphate production is expected to increase by 18% to 59,000t this year.

Matte output is another growth area. Indonesian nickel matte production is forecast to jump by 48% as conversion from NPI becomes more attractive.

The market could loosen again in 2027. Nornickel expects the surplus to widen modestly to around 55,000t if Indonesian ore quotas increase, sulphur availability improves and new processing capacity ramps up.

The near-term nickel story has therefore changed. Oversupply has not disappeared, but the margin between surplus and balance has narrowed sharply as Indonesian policy and feedstock economics begin to constrain output.

The Metalnomist Commentary

Nickel’s biggest bullish driver is no longer demand acceleration but supply discipline in Indonesia. If ore quotas remain tight and sulphur costs stay elevated, the market could remain far more balanced than recent oversupply trends suggested.

Nickel Deficit Forecast Emerges as Indonesia Tightens Ore Supply

Nickel manufacturing

Nickel deficit conditions are expected to return in 2026 as Indonesia tightens ore supply controls and stainless steel demand continues to grow. The International Nickel Study Group forecasts global primary nickel production of 3.715mn t against usage of 3.747mn t, implying a deficit of 32,000t.

The nickel deficit would mark a sharp change after three consecutive years of surplus. The market recorded surpluses of 175,000t in 2023, 116,000t in 2024 and 283,000t in 2025.

The nickel deficit forecast remains modest, but it carries strategic significance because it depends heavily on Indonesian policy. Indonesia has been the main driver of global nickel supply growth, and tighter controls on ore mining could slow the expansion that previously pushed the market into surplus.

The Middle East conflict is adding another layer of uncertainty. Higher energy prices, inflation pressure and disrupted sulphur flows could affect nickel production costs, especially for high-pressure acid leach operations in Indonesia.

Indonesia Ore Controls Reshape Nickel Supply Growth

Indonesia’s approved nickel ore mining quota for 2026 has been set significantly lower than in 2025. The quota can still be revised, but the initial reduction has already changed market expectations.

The country’s revised mineral benchmark pricing mechanism also took effect on 15 April. The new HPM formula raises base prices for all nickel ore grades and includes cobalt, iron and chromium in the valuation for the first time.

This matters because Indonesian nickel supply is no longer expanding under the same low-cost conditions that drove rapid output growth. Ore access, ore pricing, royalties and contained metal values are all becoming more tightly managed.

The policy impact is not evenly distributed. Eramet’s PT Weda Bay Nickel mine is preparing to enter care and maintenance in May after receiving an initial ore quota of just 12mn wet metric tonnes. This is far below last year’s final permit of up to 42mn wmt.

In contrast, Nickel Industries received quota approvals of 14.3mn wmt, up from 10.5mn wmt in 2025. This shows that Indonesia’s controls are not simply cutting all supply. They are also reshaping which operators receive ore access.

The quota system could therefore become a major competitive factor. Producers with larger approved volumes may gain stronger operating flexibility, while others face lower utilisation, higher costs or temporary shutdowns.

HPAL producers are especially exposed. These plants require steady limonite ore supply and large volumes of sulphuric acid or sulphur-linked feedstock. Tighter ore availability and higher reagent costs can quickly pressure margins.

Disrupted sulphur flows from the Middle East conflict have raised concern over HPAL feedstock availability. This is important because Indonesian HPAL projects have become key suppliers of mixed hydroxide precipitate for battery material production.

If sulphur costs remain elevated and ore prices rise under the new HPM formula, HPAL production costs could increase materially. That would weaken the low-cost supply advantage that helped Indonesia dominate battery-linked nickel intermediates.

Stainless Steel Supports Demand as Batteries Disappoint

Stainless steel remains the main support for nickel demand. INSG said the stainless steel sector grew in 2025 and is expected to expand further in 2026.

This is important because stainless steel still consumes far more nickel than the battery sector. Demand from stainless steel, alloys and industrial uses continues to anchor the primary nickel market.

Battery demand has grown more slowly than earlier expectations. Lithium iron phosphate chemistries have gained market share, reducing nickel intensity in parts of the electric vehicle market.

Plug-in hybrid electric vehicle demand has also outpaced fully battery-electric vehicle demand in some markets. This has limited the speed at which nickel-rich battery chemistries absorb new supply.

The result is a market caught between two forces. Supply growth is slowing because of Indonesian ore controls and higher input costs. However, battery demand is not rising fast enough to create a large structural shortage.

This makes the 2026 nickel deficit highly sensitive to policy and disruption. If Indonesia raises quotas, supply could recover. If sulphur, energy or ore costs worsen, the deficit could deepen.

The forecast also changes the market narrative. Nickel has spent recent years under pressure from surplus supply and rising inventories. A move into deficit, even a small one, could stabilise sentiment and support prices.

Still, the deficit is not yet a sign of broad scarcity. It is a warning that Indonesia’s supply discipline, not battery demand alone, is now determining the market balance.

For producers, cost control and ore access will become more important. For buyers, the focus will shift toward supplier reliability, feedstock route and exposure to Indonesian policy.

The Metalnomist Commentary

The nickel market is not tightening because batteries suddenly absorbed the surplus. It is tightening because Indonesia is putting discipline into ore supply while HPAL costs rise. That makes the nickel deficit more policy-driven than demand-driven.

Lygend posts higher nickel profits in 1H as Indonesia capacity ramps

Lygend Cobalt Mining

Lygend posts higher nickel profits in 1H on rapid capacity ramp-up. Lygend posts higher nickel profits in 1H as revenue rises 67%. As a result, Lygend posts higher nickel profits in 1H while expanding HPAL and RKEF projects.

Indonesia growth drives earnings

Lygend’s operating income rose 67% to 18.15bn yuan in January–June. Profit more than doubled to 1.43bn yuan. The company cited the ramp-up of new capacity. It did not disclose output figures. However, stronger project execution clearly supported margins. Investors will focus on volume disclosure next.

HPAL and RKEF projects advance on schedule

The ONC HPAL Phase 3 remains on track this year. It targets 65,000 t/yr nickel metal equivalent as MHP at nameplate. Meanwhile, the KPS RKEF Phase 2 already started production. Four lines are running now at the Indonesian site. The project plans eight further lines by early 2026. Four lines arrive in 2H 2025, and four in 1Q 2026. Designed capacity is 185,000 t/yr NPI.

The Metalnomist Commentary

Lygend’s profits reflect disciplined execution across HPAL and RKEF. The staggered line commissioning reduces ramp risk and smooths cash flow. Watch MHP-NPI price spreads and Indonesian policy as key drivers of 2026 earnings.

China’s GEM to Back Indonesia’s Green Nickel with HPAL Investment

Green Eco-Manufacture (GEM)

Chinese battery metals leader Green Eco-Manufacture (GEM) has entered into a groundbreaking partnership with Indonesia's PT Vale Indonesia (PTVI) to develop a high-pressure acid leaching (HPAL) project in Central Sulawesi, Indonesia. This venture aims to bolster the green energy transition in the nickel sector, a vital component of the rapidly expanding electric vehicle (EV) industry.

Key Highlights of the HPAL Project

The HPAL facility will process nickel ore supplied by PTVI to produce 66,000 tons per year (t/yr) of mixed hydroxide precipitate (MHP) in nickel metal equivalent. MHP is a precursor for advanced battery materials like nickel-cobalt-manganese (NCM) and cathode active materials (CAM), essential for lithium-ion batteries used in EVs.

Ownership Dynamics and Strategic Growth

Initially, GEM held a 70% stake in the project, while PTVI owned the remaining 30%. However, GEM’s ownership will be reduced to 25% or less, as additional third-party investors join the initiative. This strategic realignment aims to diversify financial backing and enhance the project’s scalability.

Expansion of GEM’s Nickel Ventures

GEM recently completed the second phase of its QMB nickel project in Morowali, Indonesia, achieving a total production capacity of 65,000 t/yr of nickel metal equivalent in MHP. This marks a significant milestone in its push to solidify its footprint in Indonesia’s resource-rich battery ecosystem.

China-Indonesia Collaboration in the EV Sector

The partnership reflects a broader trend of increasing China-Indonesia collaboration in the EV supply chain. Earlier this year, Indonesian mining giant PT Aneka Tambang (Antam) transferred subsidiary shares to China’s Contemporary Amperex Technology Co., Ltd. (CATL), the world’s largest EV battery manufacturer.

As the global EV market continues to expand, these collaborations are poised to make Indonesia a cornerstone of the world’s green energy revolution, leveraging its abundant nickel reserves to meet soaring demand for sustainable battery materials.