Indonesia's 2026 RKAB cut to ~235 Mwmt — its first binding annual cut in nickel-ore allocation — collides with a Middle-East sulphur crisis, a Weda Bay Nickel care-and-maintenance halt, and a landmark HPM ore-price reform (ESDM Decree 144/2026). The result: a structural repricing of the four mainstream nickel products, after four years of the post-2022 LME-squeeze price reset.
The repricing lands differently on each player. Indonesian miners should lock multi-year offtake before the 2026 RKAB clarifies and build sulphur strategic reserves; policymakers are reshaping how ore is priced via the HPM tax-reference price, and may add a sovereign MHP index; stainless mills face multi-year-high NPI payables squeezing cash margins; battery makers still get cheaper MHP-route sulphate, but supply is now sulphur-elastic. The five takeaways below set the frame; the chapters carry the full data and forecasts.
Per SMM's framework, nickel moves through five stages (Ore → Intermediate / NPI → Refined nickel supply → Downstream → End use) and resolves into four mainstream nickel products — Metallic nickel (nickel cathode / Class-1, briquette) and nickel alloys & salts (NPI, nickel sulphate) — with high-grade nickel matte the cross-over intermediate feedstock.
2025 end-use shares total 100% (65+15+11+5+4). Source: SMM Nickel Industry Chain Framework, 2025-09.
What this means for Indonesia › Indonesia already spans stages 1–2 (laterite, NPI + MHP + matte) and a rising share of stage 3 (nickel cathode, largely from MHP, and nickel sulphate); the ambition is integrated sulphate-cathode (stage 3) and selectively precursor / cell (stage 4). Four constraints gate the climb: sulphur logistics (Middle-East dependence), captive coal-power carbon intensity, long-cycle precursor / cell offtake, and IRMA / EU Battery Passport readiness.
From the post-2022 LME-squeeze cycle of disclaimer pricing and Class-1 doubt, to a multi-trigger Indonesia-led structural reset in eight weeks — the nickel market has compressed an entire cycle into the spring of 2026. This chapter lays out the chronology and the data.
Nickel's post-2022 story is the story of a benchmark recovering from violence and a market quietly redrawing its centre of gravity. The 8 March 2022 LME nickel suspension — when prices spiked above USD 100,000/t intraday and the exchange cancelled trades — sterilised LME's monopoly on Class-1 price discovery, and the four years that followed saw three slow but structural shifts: (i) progressive LME warrant expansion to admit more Class-1 brands (Chinese nickel briquette accepted into LME from 2023); (ii) the Tsingshan matte-route reversal of late 2021 maturing into a fully commercialised RKEF → high-grade matte → nickel sulphate cross-over that gave the industry a switching valve between the stainless and battery value chains; and (iii) a steady migration of physical price discovery toward SMM-anchored Asian benchmarks. Entering 2025, SMM 1# refined nickel traded at 130,600 CNY/t and NPI 12-14% Indonesia CIF at 943 CNY/Ni-1% — the lower half of the post-squeeze range, with Indonesian RKEF over-capacity weighing on payable and broad consensus that the nickel cycle would remain in oversupply through 2027.
That consensus collapsed in eight weeks of spring 2026. On 15 April 2026 the Indonesian Ministry of Energy and Mineral Resources (ESDM) issued Decree 144.K/MB.01/MEM.B/2026 (SMM news). The decree raised the HPM correction factor for 1.6%-grade nickel ore from 17% to 30% and — for the first time in the HPM mechanism's history — explicitly priced cobalt, iron and chromium as associated mineral values inside the formula. The mechanical effect on the 1.2%-grade HPAL ore was unusually sharp: HPM rose from USD 16/wmt to USD 40.18/wmt, a +251% step-up, and to USD 48.18/wmt CIF China including freight. The SHFE 2605 contract closed the news day at 137,810 CNY/t (+2.67%). Within nine working days — on 24 April 2026 (SMM) — news of the Weda Bay Nickel (WBN) mine entering "care and maintenance" because of 2026 RKAB approval shortfalls drove SHFE 2606 to 145,900 CNY/t (+2.63%). WBN formally went into care-and-maintenance from May 2026 (SMM, 2026-04-30), with downstream NPI plants in IWIP drawing on existing stockpiles.
The most analytically important feature of the 2026 reset is the order in which the four mainstream nickel products re-priced. The strongest move was NPI 12-14% Indonesia CIF tax-included, up +25.3% from 943 to 1,182 CNY/Ni-1% — a direct read on RKAB-driven ore scarcity hitting the most ore-intensive product first. SMM 1# refined nickel moved +10.2% from 130,600 to 143,900 CNY/t — the LME-tracked Class-1 metal, restrained by inventory build at LME warehouses (a chronic post-squeeze legacy). MHP Ni FOB moved ~+18% through the same window into the USD 15,379/mt Ni snapshot recorded for March 2026 (SMM). Battery-grade nickel sulphate, the gentlest move at ~+4%, was held back by precursor-buyer push-back against full pass-through and by the recycled-Ni-sulphate share holding stable at 16% in April 2026. This pattern — NPI > refined > MHP > sulphate — is the SMM-recognised staircase of a supply-driven ore-side repricing, the opposite of a demand-led move where battery-side prices would lead.
Price logic matrix — four mainstream nickel products, two drivers
Source: SMM proprietary price assessment + SMM Nickel Industry Chain Framework, 2025-09. NPI payable ratio is the ratio of NPI 12-14% CIF (CNY/Ni-1%) to LME nickel (USD/t Ni) expressed as a percentage at prevailing FX.
The most important data point is not the absolute price level but the direction of price discovery. NPI moved first and hardest; MHP and refined moved with it; sulphate moved last and least. This is the canonical signature of an ore-scarcity-driven repricing where ore-intensive products lead. For Indonesia — the country that holds ~55% of global mined nickel and has now imposed a binding RKAB constraint — this means Jakarta has, in effect, become the marginal price-setter for the entire global nickel chain. The HPM 144 reform institutionalised this: the fact that the HPM is now linked to a fixed correction factor against LME means Indonesian ore prices move automatically with global benchmarks. The next step in the institutional architecture is a sovereign Indonesia MHP nickel index, discussed in the Appendix.
The April–May 2026 deceleration signal — read carefully. Not every price move in this window was a continuation of the staircase. Refined nickel's +2.67% on HPM-144 news day and +2.63% on WBN news day were classic event reactions; once the news was absorbed, refined nickel prices traded sideways at 142,500–143,900 CNY/t with no further breakout through 28 May 2026. NPI prices ramped more steadily and continued to climb through May. Nickel sulphate prices showed almost no propagation. This selectivity in propagation is the actionable insight for buyers and sellers: the supply-driven leg of the rally is mature for refined metal; it is still running for NPI; it has barely started for sulphate. Contract terms locked in May–August 2026 will define cash margin through 2027.
Myth one: "Indonesian RKAB cuts are negotiable and will be reversed mid-year." The data argues otherwise. Indonesia's 2025 RKAB was approved at 326 Mt but actual production reached only ~265 Mt due to weather, regulatory delays and miner-capability constraints. The 2026 RKAB has been guided down through three increments: original APNI signal ~250 Mt (-34%), ESDM Bahlil Lahadalia 250-260 Mt in January 2026, ESDM Tri Winarno 260-270 Mt on 11 February 2026, and SMM analysis on 30 April 2026 (SMM) placed approval at "~90% complete with approved tonnage ~230-240 Mt." Even at the high end, this is below the 2025 demand of ~280 Mt — a binding constraint that pre-dates 2026 ESDM political dynamics and is rooted in resource depletion (average saprolite grade declined from 1.66% to 1.57% in one year). The RKAB is not a political toggle; it is an industrial reality.
Myth two: "LFP will kill cobalt-bearing chemistries and therefore cap nickel sulphate demand." The data shows a more nuanced picture. SMM data series records 9-series (NMC9xx / NCA / ultra-high-Ni) precursor monthly production rising from 1,790 tonnes/month in January 2025 to 8,880 tonnes/month in April 2026 — a 4.96× growth in sixteen months. This is a clear signal that high-Ni ternary keeps growing in absolute terms — even as LFP holds the larger share of battery volume (the January-2025 base is also depressed by Chinese New Year seasonality). LFP dominates the cost-led mid-range EV segment; high-Ni ternary dominates the energy-density-led premium segment, and the global ternary precursor reading shows a sustained 91,530 tonnes in May 2026, indicating that ternary as a category remains robust even as cobalt content per cell falls. Nickel demand from batteries is shifting up the value curve, not collapsing.
Myth three: "The LME 2022 squeeze was a one-off and price discovery returned to normal." The data shows import arbitrage has weakened, though reading this as a decisive shift in price discovery would overstate it. The SHFE/LME spot ratio compressed from 8.05 to 7.57 over 16 months — a 6% weakening of the import arbitrage that traditionally tied Chinese and global nickel prices together. SMM 1# refined nickel and NPI 12-14% Indonesia CIF have become reference benchmarks in their own right; LME warrant expansion to admit Chinese matte-route briquette in 2023 was a tacit acknowledgement that the LME monopoly on Class-1 was no longer tenable. The 2022 squeeze was the visible event; the price-discovery diaspora is the lasting consequence.
Indonesia hosts the world's most consequential nickel resource base and has now, with the 2026 RKAB cut, exercised its first binding production constraint. This chapter quantifies the resource, the grade trajectory, and the RKAB tightening arc.
Global nickel production resolves into two ore families: laterite ore (~70% of mined nickel in 2025, located primarily in Indonesia, the Philippines and New Caledonia) and sulphide ore (~30%, located primarily in Russia, Canada, Finland, Australia and China). The two families process through entirely different metallurgical chains: laterite splits between HPAL (high-pressure acid leach, suited to lower-grade limonite) producing MHP intermediate, and RKEF (rotary kiln-electric furnace) producing NPI and FeNi from higher-grade saprolite; sulphide flows mainly through traditional matte-smelting-and-electrolysis routes producing Class-1 refined nickel. Indonesia is now globally dominant on the laterite side, with approximately 55% of global mined nickel in 2025 (composite estimate from SMM industry framework + Wood Mackenzie 2025 update) and over 60% on the projected 2030 path as Sulawesi and Halmahera continue to ramp.
The RKAB (Rencana Kerja dan Anggaran Biaya — work plan and budget) is the Indonesian government's annual mining quota system. For a decade after Indonesia banned raw nickel-ore exports in 2020, RKAB approvals routinely exceeded demand by a comfortable margin and the system was effectively administrative. The 2025 cycle was the inflection point: against approved RKAB of 326 Mt, actual nickel-ore production reached only ~265 Mt — a 61 Mt gap rooted in weather (an unusually wet 2024-2025 Sulawesi rainy season), regulatory tightening (water-management and rehabilitation inspections), and miner-capability constraints (the marginal new mine in 2024-2025 cohorts was operated by smaller IUP holders without the equipment to push through monsoon production). The 2026 cycle has now seen four explicit revisions:
Sources: SMM news (SMM); APNI public statements; ESDM ministerial press conferences. Final 2026 RKAB approval was incomplete at the report cut-off; ~230-240 Mt is the SMM working estimate.
Insight 1 — grade depletion is now visible in the average. SMM tracking shows average Indonesian saprolite grade declined from 1.66% Ni in 2024 to 1.57% Ni in 2025 — a 9-basis-point compression in a single year. Grade depletion is a slow but irreversible trend; once high-grade saprolite (≥1.8%) is exhausted at a given pit, the marginal tonne shifts to lower-grade material, requiring proportionally more ore tonnage per unit of contained Ni. At 2025 grades, 280 Mt of ore translates into ~4.4 Mt of contained Ni; at 1.66% it would have translated to ~4.65 Mt. The RKAB cut is therefore not only a regulatory constraint but is also being amplified by the underlying grade trend.
Insight 2 — Indonesian ore demand is binding above any plausible 2026 RKAB. SMM analysis estimates 2025 Indonesian ore demand at ~280 Mt against an approved RKAB of 326 Mt and actual production of 265 Mt. The 2026 RKAB at ~235 Mt mid-case is therefore ~45 Mt below the demand line, even before any 2026 incremental demand from new HPAL/RKEF commissioning. The gap will be partially closed by Philippine imports (next section) and partially by inventory draw-down, but the structural binding is undeniable.
The Philippines is Indonesia's nearest substitute geography, but at a much smaller scale. SMM tracking (SMM) shows 2025 Philippines-to-China nickel ore imports at 15 Mt; an optimistic 2026 scenario could push this to 18-20 Mt if Indonesian RKAB remains tight and Philippine producers can deliver on regulatory and indigenous-consent approvals. CIF prices (1.3% grade $62.5/wmt; 1.4% $69.5/wmt; 1.6% port arrivals $65.2-72.2/wmt) sit at a meaningful discount to Indonesian HPM-equivalent ore but with quality and logistics handicaps. The Philippines cannot scale fast enough to fully replace the RKAB-cut tonnage in 2026 — its own regulatory hurdles (environmental and indigenous consent) are tightening — but it is the most consequential marginal supplier of nickel ore in the next 24 months.
Three numbers anchor the resource story. First, Indonesia's share of global mined nickel rose from ~30% in 2018 to ~55% in 2025, the largest commodity-share shift since OPEC's founding. Second, the 2026 RKAB cut removes ~45-90 Mt of approved volume versus 2025 actual production — equivalent to ~1.0-1.5 kt of contained Ni at current grade trajectory. Third, Indonesia is the only producer geography with the capital, the build-out pipeline, and the policy capacity to move the global balance; sulphide producers (Russia, Canada, Finland) are flat-to-declining; the Philippines is a marginal supplement at best. Indonesia is no longer the price-taker; it is the price-setter.
Indonesia's two-track build-out — HPAL for battery-bound MHP and RKEF for stainless-bound NPI — has commissioned more nickel capacity in five years than the rest of the world combined commissioned in the prior twenty. This chapter inventories the projects and the capital flows.
Indonesia's nickel build-out is split between two metallurgical routes that share ore but produce structurally different products. HPAL (high-pressure acid leach) processes lower-grade limonite ore (1.0-1.4% Ni) into MHP intermediate (Ni 30-40% + Co 3-5%), which is then refined — almost entirely in China — into battery-grade nickel sulphate for ternary cathode. RKEF (rotary kiln-electric furnace) processes higher-grade saprolite ore (1.6%+ Ni) into NPI (Ni 8-12% low-grade or ~25% high-grade), which feeds directly into 300-series stainless steel. The two routes have very different capital costs, very different ore requirements, very different sulphuric-acid intensities, and very different end-customer profiles. They share two things: dependence on the same Indonesian ore RKAB, and concentration in two industrial parks — IMIP (Indonesia Morowali Industrial Park) in Sulawesi and IWIP (Indonesia Weda Bay Industrial Park) in Halmahera.
The current Indonesian HPAL fleet falls into four cohorts. The foundation cohort (2021-2023) — Halmahera Persada Lygend on Obi Island (90 kt/yr Ni, 10 kt/yr Co), Huayue Nickel & Cobalt at IMIP (60/7), QMB New Energy Materials at IMIP (50/6) — established proof-of-concept for Indonesian HPAL and now operates above nameplate at HNC and Huafei. The 2024 ramp cohort — PT Huafei Nickel & Cobalt at IMIP (120/15), ESG New Energy Material (60/7) — added another 180 kt/yr of nickel capacity. The 2026-2027 commissioning cohort — SLNC (CNGR/Tsingshan, 90/10), Excelsior Nickel Cobalt (ENC, 72/8), Pomalaa (Vale/Huayou, 120/15), Sorowako HPAL (Vale/Huayou, 66/8), Huashan IMIP (120/13) — will add roughly 468 kt/yr of nickel capacity over an 18-month window. A 2027+ pipeline of further CNGR / Tsingshan / IWIP HPAL lines is in permitting or early construction.
Indonesia's RKEF capacity is concentrated in two industrial parks that together account for the majority of the world's stainless-bound NPI production. IMIP RKEF cluster (Tsingshan-led, Sulawesi, operating since 2018) — cumulatively approximately 600 kt/yr Ni capacity across multiple lines and operators including Tsingshan, Bintang Delapan, Delong, Eternal, Jinjia, Sulawesi Mining Investment. IWIP RKEF cluster (Tsingshan + WBN + IWIP shareholders, Halmahera, operating since 2020) — cumulatively approximately 420 kt/yr Ni capacity. The WBN halt of May 2026 is therefore not only a mining event; it is a downstream-cluster-level supply shock for the IWIP RKEF lines that depend on WBN ore.
Approximately USD 30+ billion of capital has been deployed or committed across Indonesian nickel processing since 2019 [analyst estimate based on disclosed FIDs from Tsingshan, Huayou, CNGR, MBMA, Vale, Harita, Nickel Industries, ENC, Sorowako and the major HPAL announcements], with Chinese majority ownership concentrated in IMIP and IWIP and a more mixed pattern at MBMA (Merdeka), Vale Indonesia, Harita, and Nickel Industries projects. The Sonic Bay cancellation in June 2024 (a BASF–Eramet HPAL JV designed for IRA / EU compliance) remains the single most consequential negative event in the pipeline — its loss removed roughly 67 kt/yr Ni and 7.5 kt/yr Co of planned 2027 capacity and concentrated the remaining capacity firmly under Chinese-affiliated ownership.
The 17 May 2026 Strait of Hormuz tanker incident lifted spot elemental-sulphur prices from ~USD 145/t to peak USD 240/t within ten trading days [analyst estimate, based on Argus / Platts public price reporting and Russia's elemental-sulphur export restrictions re-confirmed by Rosneft in April 2026]. Indonesian HPAL operators import the marginal sulphur tonne; per facts.md (SMM), 72.6% of Indonesia's March 2026 sulphur imports came from Middle East sources (UAE, Saudi, Bahrain, Kuwait and Oman) at +75% MoM total physical volume. Combined with the HPM 144 reform's +USD 2,600/t Ni cost step-up on purchased HPAL ore, the cash cost of MHP from purchased ore rose to approximately USD 17,760/t Ni (after cobalt credit). PT Huafei Nickel & Cobalt (Sulawesi) partially throttled output through the second half of May 2026, helping push the Indonesian MHP monthly figure from a peak 41.5 kt (Sep 2025) to 28 kt (May 2026) per SMM forecast series. The lesson for buyers: the MHP supply curve is now sulphur-elastic in a way it was not pre-2025. Any sustained Middle East logistics disruption transmits within 10-14 working days into the marginal MHP unit, regardless of RKAB dynamics.
Looking forward to 2030, three scenarios bracket the Indonesian capacity story. In the base case, the operating 2024 fleet plus the 2026-2027 commissioning cohort plus a measured 2027-2030 pipeline brings Indonesian nickel-in-MHP output to ~700 kt and total mined Ni to ~2,800 kt — equivalent to ~60% of global mined nickel. In the upside case, an accelerated 2028-2030 build-out (driven by US/EU strategic-mineral commitments, Indonesian domestic battery cell ramp, and continued high nickel prices) pushes the totals 10-15% higher. In the downside case, sustained tailings incidents, sulphur supply constraints and a reversion of nickel prices to USD 12,000/t cap output and discourage the 2028+ FID wave. The probability-weighted central estimate sits at ~2,800 kt mined Ni for 2030, but the upside-downside spread is wide and policy-dependent.
Nickel's refined supply splits into four mainstream products that move on distinct demand signals. This chapter walks through SMM's monthly supply-demand balance and price forecast for each, from April 2026 through April 2027.
SMM organises the refined nickel supply layer into two chemical/physical families. Metallic nickel includes Class-1 nickel cathode (≥99.8% Ni content, LME-deliverable) and nickel briquette / powder (also ≈100% Ni; briquette accepted as LME-deliverable from 2023). Nickel alloys & salts includes NPI (Nickel Pig Iron, Ni content 8-12% low-grade or ~25% high-grade — actually an iron-nickel alloy) and battery-grade nickel sulphate (Ni content 22.2% by metal content — i.e., 1 physical tonne sulphate ≈ 0.222 metal tonne Ni). Together these are the four mainstream nickel products tracked in this chapter. The fifth product family — high-grade nickel matte (Ni ~75%) — sits administratively inside intermediates as a cross-over feedstock and is treated in Chapter 5. The downstream applications differ sharply: NPI routes almost entirely to 300-series stainless; nickel sulphate routes to NCM/NCA ternary precursors; Class-1 cathode routes to alloys, electroplating, superalloys and selectively into battery applications; briquette routes to battery (via dissolution into sulphate) and LME warehouse arbitrage.
Class-1 refined nickel is the LME-tracked headline metal. SMM's monthly model shows Chinese supply at approximately 33.2 kt Ni in April 2026 rising gently to ~37 kt by end-2026 as matte-route capacity ramps, against monthly demand of ~32-35 kt — for a 2026 annual balance of approximately +15 kt in modest surplus. Prices have rebased from the post-squeeze normalisation range into the 140,000-148,000 CNY/t band, with the SMM monthly mid-forecast at 142,500-147,500 CNY/t through Q1 2027. The integrated matte-route producers (Tsingshan, Huayou via Indonesian equity) capture the lowest cash cost (~RMB 145-150k/t Ni); non-integrated producers buying MHP or matte on the spot market face cost lines that have moved up RMB 15-20k/t Ni since H2 2025.
NPI is the volume backbone of the nickel market for stainless steel. The 2026 monthly balance shows total supply (Indonesia + China) at approximately 128-141 kt Ni per month against stainless-mill demand of ~122-136 kt — for a 2026 annual surplus of approximately +55 kt, but with a sharp tightening trajectory through H2 2026 as the WBN halt and RKAB cut feed through. Prices have shown the strongest move of the four products: SMM NPI 12-14% Indonesia CIF rose from 943 CNY/Ni-1% (Jan 2025) to 1,182 CNY/Ni-1% (28 May 2026) — a +25.3% move, the cleanest read on RKAB-driven ore scarcity. The 12-month forecast band sits at 1,150-1,250 CNY/Ni-1% with the mid at 1,205-1,218.
Nickel sulphate (battery grade, Ni content 22.2%) is the structural feed for ternary precursor manufacturing. SMM data show 2026 monthly supply of 37.5-42.4 kt Ni against demand of 38.2-42.8 kt — a small but persistent deficit of approximately -8 kt for 2026, swinging to balance in 2027 as Indonesian MHP feedstock scales (subject to sulphur risk). Feed structure: MHP ~80%, recycled feedstock ~15%, nickel briquette dissolution a minor ~5% (Apr 2026). The recycled-Ni-sulphate share has been remarkably stable in the 13-17% range across the past two years, confirming that recycling is meaningful but not yet a dominant feedstock. Prices have moved gently from 27,200 CNY/t physical (Jan 2025) to 28,500 CNY/t (May 2026, +4.8%) — the most restrained move of the four products, reflecting precursor-buyer refusal to absorb full upstream pass-through.
MHP is the most analytically interesting of the four refined-supply products in 2026 because it sits at the choke point between Indonesian HPAL build-out and Chinese sulphate refining demand. SMM forecast series shows Indonesian MHP output collapsing from a September 2025 peak of 41.5 kt (Ni in MHP) to 28 kt in May 2026 — a 33% three-quarter contraction driven by the sulphur crisis and WBN halt. The 12-month forward path sees gradual recovery to 33-35.5 kt by September 2026, but this assumes sulphur normalises. Prices: MHP Ni FOB at USD 15,379/mt Ni (March 2026 snapshot, SMM), with the MHP Ni payable vs SMM battery-grade nickel sulphate at 86.5-87% — a multi-year high reflecting the supply scarcity. The Ni-side and Co-side credits combined give an effective MHP economics of approximately USD 18,000/t Ni equivalent at current 2026 cobalt prices, the strongest HPAL margin in the cycle.
Refined nickel supply has two layers: the static yield-and-cost matrix that defines who can profitably make what, and the dynamic margin path that has whipsawed since the 2022 LME squeeze. SMM's estimation table makes the first transparent; SMM's daily cost-profit dataset makes the second auditable.
Every refined-nickel product can be traced back to a feedstock × process pair with a known yield and an industry-typical unit conversion cost. The SMM Nickel Industry Chain Framework tabulates seven commercially relevant routes. Two structural facts emerge that are critical to interpreting Indonesia's cost position:
Source: SMM Nickel Industry Chain Framework (2025-09) + analyst calibration from public Tsingshan, Huayou, Vale disclosures. Costs are indicative, in 10,000 CNY per metric tonne of contained nickel; sulphur + power assumptions are 2025 baseline.
Insight 1 — The direct MHP → sulphate route is the cost-leader. At RMB 10-15k conversion cost on top of an MHP feedstock at USD 15,379/mt Ni (~RMB 105k/t Ni at prevailing FX), the total cash cost to produce a tonne of contained nickel as sulphate via MHP is approximately RMB 115-120k/t Ni. Compare to the briquette-dissolution route, where briquette cost is ~RMB 144k/t Ni (LME-anchored) plus RMB 5-10k dissolution: ~RMB 150k/t Ni total. MHP wins by ~RMB 30k/t Ni. This is the empirical basis for why Indonesian MHP is the structural backbone of Chinese nickel sulphate refining and why every major Chinese refiner has rushed to lock multi-year MHP offtake from Indonesia.
Insight 2 — The NPI → matte → sulphate cross-over is the swing valve. The 2021 Tsingshan breakthrough that converted high-grade RKEF nickel matte into battery-grade nickel sulphate gave the industry a "valve" between the stainless value chain (NPI) and the battery value chain (sulphate). At RMB 15-25k incremental cost above the direct MHP route, this cross-over is uneconomic in normal conditions — but when the sulphate-NPI price gap (per kg of contained Ni) exceeds approximately 20 CNY/Ni-1%, the cross-over activates and Indonesian RKEF capacity reallocates toward the battery chain. The April-May 2026 setup, with NPI at 1,182 CNY/Ni-1% and sulphate equivalent at ~1,280, sits below the activation threshold — but if NPI weakens or sulphate strengthens further, the cross-over becomes attractive again.
Insight 3 — Indonesian HPAL's cost edge depends on sulphur and power. The MHP cash cost band of RMB 80-110k/t Ni is dominated by sulphuric acid (HPAL is sulphur-intensive — approximately 4-5 t H₂SO₄ per t Ni produced) and electricity (captive coal-fired power plants at IMIP/IWIP). A USD 50/t step-up in sulphur cost adds approximately RMB 4-5k/t Ni; a USD 5/MWh increase in CFPP tariff adds approximately RMB 1.5-2k/t Ni. The May 2026 sulphur spike (sulphur to USD 240/t) is therefore directly visible in the 9.5 → RMB 124k/t Ni step in the MHP cash cost line shown in the cost-profit chart.
The 2026 HPM revision (Chapter 8) explicitly raised the 1.2%-grade HPAL ore HPM from USD 16/wmt to USD 40.18/wmt (+251%), with $48.18/wmt CIF including freight (SMM). Per facts.md, the mechanical cost step is +USD 2,600/mt Ni to MHP cash cost from purchased HPAL ore, bringing the post-reform MHP cash cost from purchased ore to approximately USD 17,760/mt Ni (after Co credit). Combined with three exogenous variables — sulphuric acid cost (Hormuz exposure), captive CFPP electricity tariffs, and the ad-valorem royalty layer of PP 18-19/2025 — the HPM mechanism transmits these costs into the MHP cash cost stack. The byproduct credit (cobalt at $51,000/mt Co at May 2026 MHP FOB equivalent) currently absorbs much of this — but the loop is real, and any sustained sulphur or power-cost shock will narrow Indonesia's cost edge.
The single most consequential strategic decision in the Indonesian nickel chain since 2018 was Tsingshan's 2021 announcement that it would convert excess RKEF nickel matte capacity into battery-grade nickel sulphate. The decision broke the long-held industry assumption that the stainless and battery nickel chains were physically separated and gave the global market a switching valve between the two. Five years later, the Tsingshan matte-route is fully commercialised — and now also operates in reverse: in the H2 2025 stainless-margin recovery, Tsingshan partially diverted matte production back toward stainless. This bidirectional optionality is the foundational strategic asset that distinguishes Indonesian RKEF operators from their Chinese onshore competitors.
The dominant strategic conclusion from the cost data is that integration matters more in 2026 than in any prior year of the nickel market. A refiner with equity in an Indonesian HPAL or matte-route line captures the byproduct credit (cobalt, iron, chromium) at internal transfer prices below market — generating RMB 5-15k/t Ni of incremental margin over a non-integrated peer. This explains the strategic intensity around Indonesian MHP and matte offtake contracts in late 2025 / early 2026: every major Chinese refiner not already integrated has been actively negotiating multi-year supply agreements with Indonesian producers.
Nickel inventories tell two stories: a persistent LME warehouse build that traces back to the 2022 squeeze settlement, and a much tighter SHFE / social picture that reflects the real Asian physical balance.
LME nickel warehouse inventory has built persistently since the 2022 squeeze settlement, rising from approximately 50 kt at the squeeze low to ~222 kt by April 2026. The build reflects three structural facts: (i) Russian primary nickel continues to flow to LME warehouses because of limited alternative outlets; (ii) Chinese matte-route briquette (accepted as LME-deliverable from 2023) has added a new flow path into LME warehouses; (iii) the LME's post-squeeze rule changes (broader brand acceptance, more conservative warrant management) have incentivised inventory parking. This LME build is the principal reason why Class-1 refined nickel has been the slowest-moving of the four products in the 2026 repricing — it caps the upside on Class-1 even as the physical Asian market tightens.
SHFE warehouse inventory has been considerably more volatile and reflects the actual Chinese physical balance. Through 2025 H2 SHFE built modestly with the global LME trend (peaked ~45 kt in October 2025) but has been drawn down through the 2026 rally to ~38 kt by April 2026 as the import arbitrage compressed and Chinese smelters with surplus matte diverted to spot. The Shanghai-LME warrant ratio has accordingly compressed.
Social inventory (visible warehouse stock outside LME/SHFE bonded) tracks the Chinese spot market more directly than either exchange. Through 2025 H2 social inventory built to ~28 kt; by April 2026 it has drawn down to ~27 kt and is trending lower as Chinese precursor demand stays robust and matte-route producers prefer to lock contract sales over spot. The implication: any further RKAB tightening or fresh geopolitical event will hit a Chinese physical market with limited inventory buffer and high price elasticity.
NPI inventory tells a different story. Chinese port inventory has built from 32 kt (May 2025) to 49 kt (April 2026) — a 53% rise — as Indonesian arrivals have outpaced stainless mill draw-down. Plant inventory has built more modestly from 25 to 32 kt. This NPI overhang is the principal counter-narrative to the broader nickel tightening: stainless mill margins are squeezed by ore-cost rises (NPI as input) while NPI surplus at port limits NPI's upside. The RKAB cut and WBN halt are starting to reverse this dynamic but the inventory cushion absorbs much of the initial impact.
MHP inventory has built through H2 2025 (port from 8.5 to 11.6 kt, plant from 4.2 to 5.0 kt) as Indonesian shipments outpaced Chinese refinery throughput. The Q1 2026 sulphur and WBN shocks have started to draw inventory: port at 9.0 kt by April 2026, plant at 4.0 kt. If the Indonesian MHP production recovery in H2 2026 lags by 2-3 months, MHP inventory could be drawn through by year-end — at which point downstream sulphate refiners would face physical sourcing risk, transmitting into either sulphate margin compression or precursor-side price acceleration.
Aggregating the four product-level inventory series produces an important second-order signal. Class-1 LME inventory is at a multi-year high and getting higher — a cap on Class-1 upside. NPI port inventory has built but the RKAB-driven supply rebalance is starting to draw it down. MHP inventory has built through 2025 H2 but the Q1-Q2 2026 production shock is starting to draw it. Social Class-1 inventory has thinned despite the LME build. The combined picture is a market in transition: post-LME-squeeze normalisation continues to weigh on Class-1, while the ore-scarcity-driven rebalance is starting to reach the NPI and MHP layers. The 2026 H2 question: does Indonesian MHP production recover fast enough to refill the inventory chain before the H1 2027 stainless restock cycle, or do we get a second leg of price strength in sulphate as the supply chain runs thin?
Nickel demand has split into two regimes. Stainless steel — historically the dominant demand vector — is plateauing as Chinese property and appliance demand saturates. Ternary cathode is accelerating up the nickel-content curve, with 9-series precursor at 4.96× growth in 16 months.
300-series stainless steel (Ni content 8-10%) accounts for approximately 65% of global nickel demand in 2025 and is the structural base of the nickel market. SMM forecast series shows 300-series monthly output plateauing at 1,795 kt in May 2026 against a peak of 1,923 kt in October 2025 — a 6.7% seasonal contraction that reflects three converging forces: Chinese property-completion deceleration (the multi-year drag on stainless demand from real-estate sector contraction), white-goods market saturation (Chinese household appliance penetration above 90%), and the substitution of 200-series and cold-rolled cold-formed steel for some 300-series applications. The structural plateau is now clear: SMM's 2025-2030E CAGR for stainless nickel demand is approximately +3%, down from the +5% of the 2018-2025 period. Stainless is not collapsing — it remains the dominant demand vector and will absorb the bulk of NPI production for the next decade — but it is no longer the growth engine.
The most important demand-side story of 2025-2026 is the acceleration of high-nickel ternary cathode chemistry. SMM tracks two key series: total ternary precursor monthly production and 9-series (NMC9xx / NCA / ultra-high-Ni) monthly production. The aggregate ternary precursor reading shows 67,350 t/month (Jan 2025) rising to 92,400 t/month (peak) and stabilising at 91,530 t in May 2026 — sustained high-level production despite the LFP narrative. The 9-series series shows the structural story underneath: from 1,790 t/month in January 2025 to 8,880 t/month in April 2026 — a 4.96× increase in 16 months. This is a clear signal that high-Ni ternary keeps growing in absolute terms — even as LFP holds the larger share of battery volume (the January-2025 base is also depressed by Chinese New Year seasonality). NMC811 (80% Ni) and NCA-class chemistries dominate the premium-EV and consumer-electronics-renewal segments; LFP dominates the cost-led mid-range and stationary-storage segments. The two coexist, and ternary growth is concentrating in the high-Ni tier.
The decoupling of stainless and battery nickel demand is the central analytical fact of the 2026 nickel market. Stainless demand growth is decelerating to ~+3% CAGR; battery demand growth is accelerating to ~+12% CAGR — and within battery, high-Ni share is rising fastest. This produces three implications for the four mainstream nickel products. (1) NPI demand growth tracks stainless: ~+3% CAGR through 2030; the marginal NPI buyer is a Chinese stainless mill with squeezed margins. (2) Nickel sulphate demand growth tracks battery: ~+10-12% CAGR through 2030; the marginal nickel sulphate buyer is a Chinese precursor plant with locked offtake to a global cell-maker. (3) Class-1 refined nickel demand growth tracks specialty alloy + battery briquette dissolution: ~+5% CAGR — moderate but with high-quality premium pricing power.
Indonesia's domestic stainless and battery sectors are small but structurally important. Domestic stainless mill capacity (Tsingshan Indonesia Stainless Steel Industries) absorbs ~10% of Indonesian NPI output, with the balance exported. Domestic battery cell capacity is rising: HLI Green Power (Hyundai-LG joint venture, Karawang) at 10 GWh of NCMA cell capacity operational since 2024 with expansion to 30 GWh planned; CATL Karawang complex with phase-1 6.9 GWh due Q4 2026; Indonesia's 2030 target is 140 GWh of domestic cell capacity. For Indonesian downstream players the implication is clear: there is a real domestic offtake channel emerging for both NPI (via Tsingshan stainless) and nickel sulphate (via CATL/HLI cells), but it lags the upstream HPAL/RKEF ramp by 18-36 months.
SMM organises nickel end-use into five primary classes. The 2025 shares (per the SMM Nickel Industry Chain Framework) are: Stainless steel 65%, down from 70% in 2020 — the structural plateau; Battery (EV + storage) 15%, up from 6% in 2020 — the principal accelerant; Alloy & electroplating 11%, down from 13% — gradual share loss to battery; Specialty alloy (aerospace, defence) 5%, stable — aerospace OEM order book recovery offsets the share loss; Other (catalyst, magnetics) 4%, down from 5%. The 2025 total sums to 100% (65+15+11+5+4 = 100%). In tonnage terms, total global nickel demand for 2025 sits at approximately 3,200 kt Ni.
Growth trajectories — the SMM CAGR decomposition. SMM's five-class CAGR decomposition over the 2018-2025 period: stainless +5%, battery +30%, alloy +2%, specialty +5%, other +2% — for an overall +6.5% global nickel demand CAGR. The 2025-2030E projection moderates: stainless slows to +3%, battery decelerates to +12% (still strong but down from +30%), alloy stays +2%, specialty rises to +6% (aerospace), other declines to +1%. Overall global nickel demand CAGR slows to +4% for 2025-2030E — meaningfully slower than 2018-2025 but unmistakably positive, with the slowdown concentrated in stainless (the saturated base) and the battery deceleration that the LFP narrative already prices in.
The 2026 Indonesian policy package is the most significant change in nickel fiscal architecture since the 2020 ore export ban. HPM Decree 144, the RKAB cut, and the ad-valorem royalty layer of PP 18-19/2025 together institutionalise Indonesia's role as the sovereign price-setter for global nickel.
Indonesia's nickel downstreaming doctrine — anchored by the January 2020 ban on raw nickel ore exports — has been the single most consequential mining policy of the 2020s, attracting more than USD 30 billion of HPAL and RKEF investment and transforming Indonesia from a 5% global Class-1 nickel supplier into the global price-setter within five years. The 2026 package now arms the doctrine with three coordinated levers: the RKAB volume lever (Chapter 2), the HPM price lever, and the ad-valorem royalty fiscal lever.
ESDM Decree 144.K/MB.01/MEM.B/2026, issued 15 April 2026 (SMM news), is the most significant HPM reform since the formula's introduction. The decree makes four mechanical changes:
The mechanical effect on MHP cash cost is profound: per facts.md, the cost-step from purchased HPAL ore is +USD 2,600/mt Ni, bringing post-reform MHP cash cost from purchased ore to ~USD 17,760/mt Ni (after Co credit). SHFE 2605 contract on the news day closed at 137,810 CNY/t (+2.67%).
For Indonesia, the three levers operate as a coordinated fiscal architecture. RKAB sets the volume — and the 2026 cut to ~235 Mwmt removes approximately 45-90 Mt of approved tonnage versus 2025 actual production, equivalent to ~1.0-1.5 kt of contained Ni. HPM 144 sets the ore-side reference price — and the +251% increase on 1.2%-grade HPM lifts the per-tonne royalty base by a corresponding factor. PP 18-19/2025 establishes the ad-valorem royalty rates at up to 19% at high price levels. The combined fiscal capture per tonne of nickel-equivalent HPAL output has risen by approximately +30% versus the pre-2024 regime. For Jakarta this is a sovereign asset; for Indonesian HPAL operators it is a meaningful cost burden offset by the cobalt + iron + chromium byproduct credits. Specific policy proposal: ESDM should publish a quarterly "RKAB shadow-price disclosure" that prices the dual-commodity (nickel + cobalt + iron + chromium) value embedded per Mwmt of RKAB allocation, so the volume-tightening lever is priced in all four currencies simultaneously — this would close the data gap that currently makes RKAB decisions appear nickel-only when in fact they affect the cobalt market just as much.
Government Regulation PP No. 18 and 19 of 2025 (effective April 2025) restructured Indonesian nickel and cobalt royalty into a tiered ad-valorem framework with rates rising to 19% at high price levels. Combined with the additional USD 1.0-1.5/wmt royalty per nickel-percent on ore introduced in 2025 and the HPM 144 reform of April 2026, the effective state-take per tonne of nickel-equivalent HPAL output has risen by approximately 30%+ versus the pre-2024 regime. For cobalt specifically, the royalty applies to the contained cobalt portion of MHP at the new HPM reference — meaning the state captures more of the cobalt windfall under the integrated nickel-cobalt accounting than under prior regimes.
Indonesian government officials have begun framing the country's nickel/cobalt market position as analogous to OPEC's role in oil ("ONEC" — Organisation of Nickel-Exporting Countries). The framing has practical content: the RKAB cut + HPM revision + royalty restructure create a coordinated supply-and-pricing toolkit that Jakarta can use to support nickel and cobalt prices when oversupply threatens — and that, equally, gives downstream consumers a clearer set of policy variables to model. Whether the framing extends to a formal producers' alliance with the Philippines, New Caledonia or DRC is unclear, but the toolkit itself is real and consequential.
The February 2026 US-Indonesia Agreement on Reciprocal Trade includes a USD 33 billion package with explicit critical-mineral language: Indonesia confirms its commitment to refuse raw mineral exports and the US confirms market access for processed Indonesian critical minerals. The agreement also includes implicit Chinese-ownership ceilings that have not been formally specified but are widely understood in Jakarta to apply to projects seeking IRA-style critical-mineral tax credits. The agreement is consistent with the downstreaming doctrine but creates real tension with the 80%-Chinese-led nature of current HPAL capacity. Resolving this tension — likely through additional Western-led FIDs and a measured de-concentration of Chinese ownership — will be a defining policy challenge through 2027.
Indonesia's nickel ESG file looks nothing like DRC's cobalt file. The frontier issues are filtered tailings (two IMIP dam failures in 13 months), captive coal-power, and indigenous land rights at Halmahera HPAL sites.
The DRC cobalt ESG narrative — artisanal mining, child labour, conflict-mineral routes — does not transfer to Indonesian nickel. Indonesian nickel processing is entirely industrial; there is no artisanal mining; Indonesia is a stable democracy with strong central-government mining oversight. The Indonesian nickel ESG frontier is dominated by three different concerns: tailings management (filtered tailings dam failures at IMIP), captive coal-power carbon intensity, and indigenous land rights — particularly the Hongana Manyawa case in Halmahera. The IRMA / EU Battery Passport regulatory framework will sharpen all three.
HPAL produces approximately 1.4-1.6 tonnes of sulphuric-acid-bearing tailings per tonne of contained nickel. Indonesia bans deep-sea tailings disposal (DSTP), re-confirmed by Coordinating Minister Pandjaitan in 2023 and reinforced by Ministerial Regulation in 2024. The only permitted alternative is filtered tailings storage in engineered dams — a technology that has now failed twice at the IMIP complex (March 2025 and February 2026 dam incidents). The Earthworks-WALHI report "Filtered Tailings in Indonesia: The Catastrophic Failure of a Disruptive Technology" (2025) documents the first incident and argues that the seismic, high-rainfall, dense-vegetation environment of Sulawesi and Halmahera makes filtered-tailings dams structurally inadequate. The implication for buyers: any nickel offtake contract from Indonesian HPAL after 2026 must include tailings-management audit terms aligned with IRMA / Initiative for Responsible Mining Assurance standards.
Indonesian HPAL is currently power-supplied largely by coal-fired captive power plants (CFPP) at IMIP and IWIP. According to IEEFA's 2024 analysis, this gives Indonesian HPAL-derived nickel a carbon intensity of approximately 13 tCO2 per tonne of nickel in MHP — lower than RKEF/NPI (28-68 tCO2/t Ni) but materially higher than Western HPAL operations powered by gas or renewables (~6 tCO2/t Ni). For the EU Battery Passport (mandatory from February 2027), Indonesian HPAL nickel will need to disclose this carbon intensity at the cell level, with implications for cell-maker procurement decisions in the EU market. Harita's 300 MW solar project at Obi Island and similar planned installations at IMIP and IWIP are the principal mitigation; full decarbonisation is realistically a 2030+ project.
The Hongana Manyawa indigenous group on Halmahera island has been the focus of international attention following the Survival International / AEER advocacy campaigns of 2024-2025. The Sonic Bay cancellation in June 2024 was partly attributed to these concerns. Subsequent Indonesian government engagement has produced a more structured framework for indigenous consultation on new HPAL FIDs, but the issue remains a binding constraint on the pace of permit issuance for Halmahera-based projects, including future expansions of IWIP and adjacent HPAL units.
Two ESG-linked regulatory frameworks will shape the Indonesian nickel market from 2026 onward. The EU Battery Passport (Regulation 2023/1542) enters mandatory phase from February 2027, requiring cell-level traceability including nickel provenance, GHG intensity, and recycled content. IRMA (Initiative for Responsible Mining Assurance) certification has been achieved by Vale and Harita and is in the pipeline for HNC, QMB and Lygend; some IMIP and IWIP operators are not yet IRMA-aligned. By 2027, IRMA-equivalent reporting will be table stakes for any nickel offtake contract destined for the EU or for Korean OEMs subject to Korea's K-Battery / US IRA disclosure rules.
SMM's monthly forecast model and SMM scenario simulator together produce three plausible 2026-2030 paths for the four mainstream nickel products. The base case is neutral, the upside is RKAB-tight, and the downside is RKAB-relaxed-plus-LFP-acceleration.
The neutral scenario assumes 2026 RKAB approved at ~235 Mwmt with no further cuts in 2027; Indonesian MHP recovers to 40 kt/month run-rate by Q3 2026 as sulphur normalises; WBN restarts before year-end 2026; 9-series precursor demand continues at +10% CAGR through 2030. Under this scenario, SMM's path shows LME nickel averaging 145,000 CNY/t in 2026 rising to ~152,000 in 2027 before easing back to 142,000 by 2030 as the supply rebalance matures. NPI 12-14% Indonesia CIF averages 1,180 CNY/Ni-1% in 2026 and ~1,240 in 2027. Battery-grade nickel sulphate averages 28,800 CNY/t physical in 2026 and 29,800 in 2027. MHP Ni FOB averages USD 15,700/mt Ni in 2026 and 16,400 in 2027. The 2026 global Ni balance is a 55 kt deficit, recovering to 90 kt surplus by 2030 as the Indonesian capacity wave outpaces demand growth.
The pessimistic scenario assumes 2026 RKAB approved at ~200 Mwmt with another 5% cut in 2027 driven by grade depletion and ESG-linked environmental tightening; Middle-East sulphur disruption recurs in Q4 2026 / Q1 2027; WBN restart slips to Q2 2027; 9-series precursor demand accelerates to +15% CAGR. Under this scenario, LME nickel averages 160,000 CNY/t in 2026 rising to ~178,000 in 2027; NPI 12-14% to 1,280-1,380 CNY/Ni-1%; nickel sulphate to 31,200-33,500 CNY/t; MHP Ni FOB to USD 17,800-19,200/mt Ni. The 2026 global Ni balance deepens to 120 kt deficit, recovering only modestly by 2030.
The bullish-for-buyers scenario assumes Jakarta relaxes the 2027 RKAB above 290 Mwmt as Bahlil's successor takes a more growth-oriented stance; sulphur supply normalises by Q3 2026; Philippines exports rise above 25 Mt/yr; LFP captures >70% of global EV battery installs by 2028. Under this scenario, the Indonesian capacity wave outpaces demand: LME nickel falls to 138,000 CNY/t in 2026 and 132,000 by 2027; NPI 12-14% to 1,080-1,120; nickel sulphate to 27,500-28,000; MHP Ni FOB to USD 14,200-14,800. For Indonesian miners and HPAL operators this is the principal downside risk — a price reversion would compress byproduct economics back toward 2023-2024 marginal-cash-cost levels and slow the post-2027 capacity expansion. The probability weight of 15% reflects the political and fiscal incentives in Jakarta to maintain the price-supporting RKAB framework.
For offtake buyers, the prudent strategy in 2026 is to lock multi-year MHP and NPI supply at current benchmarks with annual price-formula adjustments tied to a 50/50 weighting of LME nickel and SMM Indonesia MHP FOB — capturing some of the neutral-scenario margin while protecting against the pessimistic-scenario upside and not over-paying in the bullish-scenario downside. For sellers, the prudent strategy is to maintain optionality on physical delivery, with a higher proportion of spot sales than has been typical to participate in the 2026 price strength. The single most important contract feature in 2026 is a sulphur-cost-pass-through clause: with MHP cost now sulphur-elastic and Middle-East dependence proven, neither buyers nor sellers should bear unhedged sulphur risk.
Beyond the 24-month forecast horizon, the critical question is whether 2028 marks a structural inflection. Three forces converge in 2028: (1) the full ramp of the 2026-2027 Indonesian commissioning cohort adds approximately 200-300 kt of nickel-in-MHP equivalent capacity; (2) Philippine and New Caledonia capacity decisions are revisited; (3) the RKAB framework is up for renewal — Jakarta may extend, tighten, or relax it depending on the fiscal, political and price context. If the RKAB framework persists in tight form, 2028 is balanced-to-tight; if it relaxes and Indonesian capacity ramps unconstrained, 2028 is a substantial surplus year and nickel prices return to the 2023-2024 marginal-cash-cost equilibrium. This binary outcome is the principal long-term planning challenge for both Indonesian producers and downstream offtake counterparties.
This chapter translates the data and forecasts into specific action items for four stakeholder groups: Indonesian miners, stainless mills, battery OEMs and cell-makers, and Indonesian government.
Lock multi-year MHP / NPI offtake before the 2026 RKAB clarifies. With NPI Indonesia CIF at 1,182 CNY/Ni-1% and MHP Ni FOB at USD 15,379/mt Ni, 2026 H1 contract terms will define cash margin through 2027. Lock 3-5 year contracts with annual price-formula adjustments tied to SMM benchmarks.
Build a sulphur strategic reserve. The May 2026 sulphur crisis demonstrated that Indonesian HPAL is now sulphur-elastic. A 60-90 day strategic sulphur reserve at IMIP and IWIP would meaningfully insulate MHP production from future Hormuz / Red Sea disruptions — the cost is small relative to the operating leverage protected.
Prepare for IRMA / EU Battery Passport from 2027. Begin third-party audit cycles in H2 2026 to be ready for February 2027 EU compliance and 2028 Korean K-Battery requirements. Vale and Harita have led; the rest of the Chinese-affiliated cohort needs to follow.
Accelerate downstream investment. The 2026-2027 commissioning cohort adds ~470 kt/yr Ni capacity. Use the proceeds to finance domestic refining (sulphate, precursor) and selectively cathode — Indonesia's domestic value chain captures 2-3× the upstream MHP margin.
The NPI Ni payable upcycle is real but ore-driven. NPI 12-14% Indonesia CIF at 1,182 CNY/Ni-1% reflects the RKAB cut and WBN halt, not stainless demand strength. Margin compression at the mill level is unavoidable; the question is whether to absorb (with EBIT contraction) or pass through to downstream customers (with volume risk).
Scrap nickel is the most cost-effective hedge. 304 stainless scrap pricing (SMM) tracks NPI Ni-1% but with no RKAB exposure. Building scrap inventory through Q3 2026 is the highest-leverage tactical move available to the mill operator.
Watch the Tsingshan matte-route valve. If Tsingshan diverts more RKEF capacity to matte-route nickel sulphate (as it did in 2021-2022), NPI supply tightens further. Counter-position: lock multi-year NPI offtake from non-Tsingshan operators in IMIP and IWIP, who do not have matte-route optionality.
200-series substitution is the structural defence. Where end-customer applications allow, 200-series (low-Ni, Mn-bearing) stainless substitutes economically when NPI Ni payable rises above 90%. Maintain the production-mix flexibility.
Indonesian MHP is the structural alternative to LME-route nickel for batteries. The four-product cost matrix shows MHP → sulphate at RMB 115-120k/t Ni versus briquette dissolution at ~RMB 150k/t Ni — a RMB 30k/t structural advantage for the MHP route. Multi-year MHP offtake from Indonesian HPAL is the principal lever for battery-Ni cost competitiveness through 2030.
The 9-series acceleration is real and durable. SMM shows 9-series precursor at 8,880 t/month in April 2026, +396% versus January 2025. This is structural high-Ni demand, not a transient spike. OEMs committed to NMC811 or NCA chemistries should plan capacity expansion against this signal, not against the LFP-dominance headlines.
Indonesian cell capacity reaches ~140 GWh by 2030. For OEMs assembling in Indonesia (Wuling, Vinfast, Toyota PHEV), this matters for IRA-style local-content qualification and ASEAN trade preferences. Sequence procurement from local Indonesian cell capacity to capture the trade benefit.
Diversify the procurement risk profile. Consider a 75% MHP-route / 10% briquette-route / 15% recycled mix by 2028 to mitigate any single-source disruption (sulphur, RKAB, geopolitical).
Publish the Indonesia MHP Nickel Index. The four-product price discovery framework now needs a sovereign Indonesia-anchored benchmark for MHP comparable to LME for Class-1 nickel. ESDM × MIND ID × Antam co-developing an SMM-methodology-aligned MHP nickel FOB index would migrate price discovery from the SMM-implied / LME-derived hybrid that currently dominates to an Indonesia sovereign-aligned benchmark — and would become the formal HPM nickel-side anchor for royalty calculations.
Diversify HPAL ownership. The Sonic Bay cancellation in 2024 underscored the cost of single-source dependence. Active support for Western and Korean FIDs — through investment incentives, regulatory predictability, and a workable indigenous-rights framework — would meaningfully de-risk the long-term nickel supply story.
Lead on tailings safety. The IMIP filtered-tailings dam failures (March 2025, February 2026) are a binding constraint on permit approvals. A national tailings safety standard — co-developed with ICMM and IRMA — would unlock the next wave of EU- and IRA-compliant investment.
Build the sulphur strategic reserve at sovereign level. Beyond individual operators, a national sulphur strategic reserve at 90-day import-equivalent capacity would insulate Indonesia's HPAL fleet from the Middle-East dependence that the May 2026 crisis revealed.
Twelve operating, under-construction, or cancelled Indonesian nickel-processing units as tracked by SMM. Nickel and cobalt capacities are nameplate at full ramp. Status as of May 2026.
| Project | Type | Status | Ni cap (kt/yr) | Co cap (kt/yr) | Online |
|---|---|---|---|---|---|
| Halmahera Persada Lygend (Obi) | HPAL | Operating | 90 | 10 | 2021-Q3 |
| Huayue Nickel & Cobalt (IMIP) | HPAL | Operating | 60 | 7 | 2022-Q1 |
| QMB New Energy Materials (IMIP) | HPAL | Operating | 50 | 6 | 2023-Q2 |
| PT Huafei Nickel & Cobalt (IMIP) | HPAL | Operating | 120 | 15 | 2024-Q1 |
| ESG New Energy Material | HPAL | Operating | 60 | 7 | 2024-Q4 |
| SLNC (CNGR / Tsingshan) | HPAL | Under construction | 90 | 10 | 2026-Q2 |
| Excelsior Nickel Cobalt (ENC) | HPAL | Under construction | 72 | 8 | 2026-Q3 |
| Pomalaa (Vale / Huayou) | HPAL | Under construction | 120 | 15 | 2026-Q4 |
| Sorowako HPAL (Vale-Huayou) | HPAL | Under construction | 66 | 8 | 2027-Q1 |
| Huashan (IMIP) | HPAL | Under construction | 120 | 13 | 2027-Q2 |
| IMIP RKEF cluster (cumulative) | RKEF | Operating | 600 | 0 | 2018-Q1 |
| IWIP RKEF cluster (cumulative) | RKEF | Operating | 420 | 0 | 2020-Q4 |
| Sonic Bay (BASF-Eramet) | HPAL | Cancelled | 67 | 7 | 2027-Q1 |
Monthly closing prices for the four SMM-tracked mainstream nickel products plus key associated benchmarks. All prices in original SMM unit.
| Product | Unit | Dec 2025 | Jan 2026 | Feb 2026 | Mar 2026 | Apr 2026 | MoM % |
|---|---|---|---|---|---|---|---|
| SMM 1# Refined nickel (Class-1) | CNY/t | 135,200 | 136,400 | 137,810 | 142,500 | 143,900 | +1.0% |
| NPI 12-14% Indonesia CIF (tax-inc) | CNY/Ni-1% | 1,095 | 1,112 | 1,138 | 1,167 | 1,182 | +1.3% |
| Battery-grade nickel sulphate | CNY/t physical | 27,800 | 27,900 | 28,200 | 28,350 | 28,500 | +0.5% |
| MHP Ni FOB | USD/mt Ni | 14,920 | 15,180 | 15,379 | 15,450 | 15,520 | +0.5% |
| MHP Co FOB | USD/mt Co | 46,200 | 48,100 | 49,879 | 50,500 | 51,100 | +1.2% |
| High-grade nickel matte FOB | USD/mt Ni | 15,300 | 15,530 | 15,736 | 15,810 | 15,880 | +0.4% |
| SHFE / LME spot ratio | ratio | 8 | 8 | 8 | 8 | 8 | -0.1% |
| HPM 1.2% (HPAL grade) | USD/wmt | 16 | 16 | 16 | 40 | 48 | +19.0% |
| HPM 1.5% (saprolite) | USD/wmt | 71 | 71 | 71 | 72 | 72 | +1.4% |
| 300-series stainless SMM (monthly) | 10k t/month | 188 | 185 | 182 | 180 | 180 | -0.3% |
| 9-series precursor (China) | t/month | 5,400 | 6,200 | 7,250 | 8,880 | 8,880 | +0.0% |
| Ternary precursor total (China) | t/month | 86,200 | 88,400 | 90,100 | 92,400 | 91,530 | -0.9% |
| MHP Ni payable vs Ni sulphate | % | 82 | 84 | 86 | 87 | 87 | +0.0 pp |
SMM operates three parallel nickel pricing systems plus two flagship indices. This appendix consolidates the formulas, weighting rules, and constants that recur across the report.
LME Cash + 3M futures = global Class-1 refined nickel benchmark
+ regional spot premiums (European premium / Asian premium / US Midwest)
+ MJP (Major Japanese Port premium)
Post-2022 squeeze legacy: tighter limit-up/down controls; broader brand acceptance (Chinese briquette accepted from 2023); migration of physical price discovery toward Asian benchmarks.
SMM high-grade NPI price (CNY/Ni-1%, tax-included) = stainless-mill bid price + processing premium
SMM Indonesia NPI FOB (USD/Ni-1%) = NPI Indonesia ex-works for export to China + freight
NPI Ni payable = NPI price / LME nickel × 100%
Historical mean: 80-90%. Indonesian NPI surplus (2024-2025) compressed to 75-80%. RKAB tightening (2026) lifts to 88-92%.
LME route (mainstream): MHP CIF = LME nickel × Ni payable + cobalt byproduct credit
Ni payable historical mean: 70-80%. Post-2022 LME squeeze low: 60-65%. 2025-2026 tight band: 75-82%; April 2026 reached 87% (the data anchor).
Co credit = MB cobalt × Co payable × Co content.
SMM reverse-implied route (Chinese buyer cross-check):
MHP_Ni = (SMM nickel sulphate / 0.222 − tolling fee) / VAT / FX × yield × Ni content
+ Co credit identical to above.
Constants: 0.222 = Ni content of nickel sulphate. Tolling RMB 10-15k per t Ni metal.
Constants: nickel sulphate Ni 22.2%; nickel chloride Ni 24.7%; nickel nitrate Ni 20.2%.
The NPI processing-fee index is a composite index incorporating participating-enterprise price quotes plus three fundamental factors:
SMM NPI processing index = (P1×W1 + … + Pn×Wn) + Wa×Pa + Wb×Pb + Wc×Pc
where:
Price factor (X%) — buyer (stainless mills) X%, seller (NPI plants / Indonesia RKEF projects) X%
Fundamental factors (1−X%):
(Wa, Pa) — inventory factor (port + plant)
(Wb, Pb) — supply-demand factor (Indonesia shipment cadence + China arrivals)
(Wc, Pc) — profit factor (stainless mill on-screen margin)
Source: SMM Nickel Industry Chain Framework, 2025-09. Constants and weighting rules are SMM proprietary; reproduced here under the data-pro permitted-disclosure provisions.
Indonesia (ESDM × MIND ID × Antam × KEMENPERIN) could co-develop an SMM-methodology-aligned Indonesia MHP Nickel FOB Index that mirrors the four-step process documented above: (i) daily quotation collection from operating Indonesian HPAL producers and their Chinese / Korean / European MHP buyers; (ii) weight rebalancing with the same 25% maximum single-enterprise cap; (iii) seller (Indonesian HPAL) 50% / buyer (precursor & cell-maker) 50% architecture; (iv) AB-post cross-checked daily publication. An Indonesia-anchored nickel index would become the local HPM nickel-side anchor and royalty reference — analogous to LME nickel's role in current HPM benchmarks — and would migrate price discovery from the LME-derived / SMM-implied hybrid that currently dominates to a sovereign-aligned benchmark. The methodology infrastructure already exists at SMM; the policy step is publication branding and regulatory anchoring under the HPM 144 framework.
| Class-1 nickel | LME-deliverable refined nickel (≥99.8% Ni). Includes cathode plate, briquette and powder; primarily used for alloys, electroplating and selectively battery via dissolution into nickel sulphate. |
| NPI | Nickel Pig Iron — a low-grade (Ni 8-12%) or high-grade (~25%) Fe-Ni alloy produced via RKEF (Rotary Kiln-Electric Furnace) processing of nickel laterite ore. The dominant feedstock for 300-series stainless steel. |
| MHP | Mixed Hydroxide Precipitate — the cobalt-and-nickel intermediate produced by HPAL processing of nickel laterite ore. Typically 30-40% Ni and 3-5% Co by weight. The dominant feedstock for battery-grade nickel sulphate. |
| HPAL | High-Pressure Acid Leach — the hydrometallurgical route for processing low-grade nickel laterite (limonite) ore into battery-grade nickel and cobalt intermediates. Sulphur-intensive; coal-power-intensive. |
| RKEF | Rotary Kiln-Electric Furnace — the pyrometallurgical route for processing nickel laterite (saprolite) ore into NPI / FeNi. The dominant Indonesian stainless-steel feedstock route. |
| High-grade matte | Concentrated nickel intermediate (Ni ~75%) produced by converting RKEF matte; the cross-over route enabling RKEF capacity to swing between stainless (NPI) and battery (nickel sulphate) value chains. The 2021 Tsingshan breakthrough. |
| Nickel sulphate | Battery-grade nickel salt (Ni content 22.2% by metal content); the structural feed for ternary cathode precursor (NCM/NCA). Produced mainly from MHP (~80%) and recycled feedstock (~15%); nickel briquette dissolution is a minor ~5% route. |
| Metallic nickel | Encompasses Class-1 nickel cathode and nickel briquette/powder — the two metallic-form mainstream nickel products. Distinct from 'nickel alloys & salts' which encompasses NPI and nickel sulphate. |
| RKAB | Indonesia's annual national mining quota / work plan and budget (Rencana Kerja dan Anggaran Biaya). The 2026 RKAB cut to ~235 Mwmt represents the first binding annual contraction in Indonesian nickel-ore allocation. |
| HPM | Harga Patokan Mineral — Indonesian government reference price for ore-based royalty calculations. The April 2026 HPM Decree 144 reform raised the 1.2%-grade HPAL ore HPM from $16/wmt to $40.18/wmt and explicitly priced cobalt, iron and chromium for the first time. |
| LME 2022 squeeze | 8 March 2022 LME nickel trading suspension after prices spiked above USD 100,000/t intraday following short-squeeze positioning concentrated on Tsingshan. The squeeze led to cancelled trades, broader subsequent brand acceptance, and a lasting migration of physical price discovery toward Asian benchmarks. |
| IMIP / IWIP | Indonesia Morowali Industrial Park (Sulawesi) and Indonesia Weda Bay Industrial Park (Halmahera) — the two industrial clusters that host the majority of Indonesia's RKEF and HPAL capacity. |
| WBN | Weda Bay Nickel — a major Halmahera nickel mine whose 'care and maintenance' designation in May 2026 (following RKAB approval shortfalls) drove SHFE 2606 contract to 145,900 CNY/t (+2.63%) on 24 April 2026. |
| Ni payable | The ratio of the price paid for nickel contained in an intermediate (MHP, NPI, matte) to the benchmark price of refined nickel. Historical means: MHP 70-80%, NPI 80-90%. |
| FOB | Free On Board — the Incoterm under which the seller delivers goods at the port of shipment with risk transferring at that point. SMM's Indonesia MHP nickel index is reported FOB Indonesia. |
| IRMA | Initiative for Responsible Mining Assurance — the leading independent ESG certification standard for mining operations; widely adopted by major Western OEMs for nickel and cobalt supply chain compliance. |
| IRA | US Inflation Reduction Act (2022) — provides EV tax credits contingent on critical-mineral and battery-component sourcing from US-aligned countries; relevant for Indonesia under the 2026 US-Indonesia Agreement on Reciprocal Trade. |
| EU CRMA | European Union Critical Raw Materials Act (2024) — establishes the EU's strategic project framework for critical minerals including nickel. |
| EU Battery Passport | EU Regulation 2023/1542, mandatory from February 2027 — requires cell-level traceability including nickel and cobalt provenance, GHG intensity and recycled content. |
| FPIC | Free, Prior and Informed Consent — the international standard for indigenous community consultation on extractive projects; central to the Hongana Manyawa case at Halmahera. |
| DSTP | Deep Sea Tailings Placement — disposal of mining tailings into deep ocean, banned in Indonesia since 2023; the ban is the upstream cause of the IMIP filtered-tailings dam failures. |