MHP producers in Indonesia ‘reduce output amid sulphur squeeze’

Several battery material nickel miners in Indonesia have reportedly trimmed output by at least 10% due to a shortage of and higher prices for sulphur caused by supply disruptions arising from war in the Middle East. Sulphuric acid is used to process nickel ore into mixed hydroxide precipitate (MHP), a feedstock used in electric vehicle (EV) batteries.

The operational setback comes after many plants had been running above capacity to benefit from wide margins and high demand. The production cuts have taken output back to nameplate levels. Though Indonesia’s overall nickel production remains high, that means MHP supply is tightening. The Middle East provides 75% to 80% of Indonesia’s sulphur, and about a quarter globally, according to Arif Perdana Kusuma, chairman of the country’s nickel smelters association FINI. No high-pressure acid leach (HPAL) nickel refiner has yet been forced to halt MHP production because of the sulphur disruptions, but inventories at several are running low with stocks only sufficient to last until May at best, he added. Some producers are seeking alternative sulphur supplies, but that is difficult because available volumes are smaller and shipping distances longer, Kusuma said. Others are trying to import sulphuric acid instead, which poses logistical challenges and requires import permits. He estimates that sulphur now accounts for 30% to 35% of HPAL operating costs, up from 25% typically.

Indonesian nickel producers also face a margin squeeze from higher prices caused by two other factors: the government’s reduction of permitted nickel mining quotas to between 250-270 million wet metric tonnes this year, down from 379 million t/a in 2025; and a revised a formula to determine the floor price for calculating tax and royalties on nickel ore sales, effective 15 April.