Indonesia has overhauled the formula that determines its Mineral Benchmark Price, known locally as HPM, and the new approach is already in force. The reset trims the minimum payable price for lower-grade nickel ore, a move framed as relief for domestic processors grappling with cost pressures tied to the US-Iran war. It also marks a reversal for the energy and mineral resources ministry, which had most recently adjusted the HPM formula in April.
HPAL plants - high pressure acid leach facilities that turn low-grade ore into battery-grade chemicals - are set to benefit from the lower benchmark. These operators have been hit by a run-up in sulfur prices linked to the Middle East war, prompting some to consider coordinated production cuts. Bloomberg's math suggests that, at the updated level, 1.2% nickel ore would be priced at close to half what it was before.
This year and next are expected to see an expansion of new HPAL capacity, a surge that could further weigh on nickel prices, which hit their 2024 low on Wednesday. The material HPALs produce, mixed hydroxide precipitate, can be further refined into pure nickel that qualifies for storage in London Metal Exchange warehouses. Beyond price dynamics, the HPM is also the yardstick for calculating royalties owed by miners and processors, and the government has been seeking extra income to fund President Prabowo Subianto's signature programs.
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If cheaper feedstock improves margins at Indonesia's HPAL projects while new capacity comes online, nickel markets could stay choppy. For anyone with exposure to EV supply chains or commodities more broadly, keep an eye on how this policy shift, sulfur costs, and the LME inventories move together.
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