Indonesian nickel smelters sell groundbreaking goods at the lowest production costs in the world, and are subject to rising prices of key raw materials, just as the market wears too much profit.
The price of sulfur used to produce acids has more than tripled in the past year, due to increased demand. For Indonesian manufacturers, this is a headache for producers who use hyperbaric acid leaching, called HPAL. Breakthrough technology allows smelters to extract metal from lower-grade ores with chemicals, thus avoiding the need for jet furnaces.
Indonesia is home to the world’s largest nickel industry, with Chinese-led investments and focused on cost-cutting innovations that have led to a production boom in recent years. The rise of nickel metal supplies, a commodity that is crucial to automotive batteries, has driven prices down, with London’s benchmark refined futures hitting its lowest levels since 2020 earlier this year.
This downturn has exacerbated competition among producers, posing challenges to the industry and local governments that have promoted mineral development in a way that promotes Southeast Asia’s largest economy. HPAL plants have been enjoying policy preferences due to lower emissions and costs, although the central government said this week that the plant plans to plan Punish the producer In a major industrial park, there is suspected environmental rupture.
“We may see the HPAL factory point later this year or early next year,” said Luigi Fan, an analyst at SMM Information & Technology.
Existing producers include PT Trimegah Bangun Persada, known as Harita Nickel, and Lygend Resources & Technology Co., China, of Obi Island. Upcoming projects include Nickel Industries Ltd., backed by Chinese giant Tsingshan Holding Group Co., and a company from Weda Bay’s PT Harum Energy.
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The expansion of HPAL’s business has led Indonesia to become the world’s leading importer of sulfur, which is traditionally used to make fertilizers. Middle Eastern countries and Canada are major producers, with global oil specialists such as Saudi Arabia Oil Corporation (Aramco), recovering sulfur from natural gas and oil processing.
It requires about 12 tons of sulfur to make 1 ton of mixed hydroxy precipitate or MHP, a form of nickel targeting automakers. Fans say that given the increase in sulfur costs, HPAL plants will need to pay more than $2,500 per ton of MHP than last year, which is forcing margins in the still growing industry. Currently, the average cost of producing 1 ton of MHP is about $11,000.
Indonesia’s production is expected to continue to rise. According to Angela Durrant, chief analyst at CRU Group Fund Metals, MHP Nickel production will increase to 619,000 tons in 2026, an increase of more than a third from this year.
“Although the cost pressures caused by rising sulfur prices since mid-2024, Indonesia’s HPAL assets will remain in the first quartile of the cost curve,” Durant said. “We do not expect sulfur prices to slow down the rate of capacity increase.”