Key Takeaways
- • Indonesia's Energy Ministry reduced the "corrective factor" in its Mineral Benchmark Price (HPM) formula to 14% from 26% for low-grade nickel ore (limonite) with 1.2% nickel content, effective September 15, 2026, lowering feedstock costs for smelters.
- • Cobalt corrective factor also decreased to 17% from 30%, reflecting the government's first-time treatment of cobalt as a separate commodity within the HPM pricing mechanism.
- • Lower benchmark prices will reduce ore acquisition costs and associated taxes and royalties for high-pressure acid leach (HPAL) smelters, protecting operators against operational losses amid elevated sulphur costs linked to Middle East geopolitical tensions.
- • Indonesian nickel smelters association FINI stated the revised formula provides "operational certainty" and protects the EV battery supply chain; miners association APNI cautioned the need for monitoring impact on realized prices, traded volumes, and government revenue.
- • The policy shift is expected to expand utilization of previously economically marginal low-grade ore reserves and increase limonite uptake by HPAL facilities, with potential implications for Indonesia's nickel export competitiveness in battery materials production.
Summary
Indonesia's Energy Ministry implemented a structural revision to its nickel ore benchmark pricing formula on September 15, 2026, reducing the corrective factors applied to low-grade nickel ore calculations. The "corrective factor" for limonite ore containing 1.2% nickel content was halved from 26% to 14%, while the corrective factor for cobalt content decreased from 30% to 17%. This marks the first instance the government has separately classified cobalt within the HPM framework, signaling a more granular approach to commodity pricing within Indonesia's nickel sector.
The revision directly addresses operational challenges facing Indonesia's high-pressure acid leach (HPAL) smelters, which process low-grade ore into materials used in EV battery manufacturing. According to Arief Perdanakusumah, chairman of industry group FINI, the previous pricing formula had become untenable for operators facing compounding cost pressures, particularly elevated sulphur prices resulting from the geopolitical situation in the Middle East. The new formula will lower ore acquisition costs alongside taxes and royalties tied to limonite feedstock, providing what industry stakeholders describe as "operational certainty" and reducing exposure to cash flow deficits.
The Indonesian nickel miners association (APNI) acknowledged the economic rationale for the adjustment, noting that a "formula better aligned with the economics of limonite could expand the utilisation of low-grade ore reserves" and drive uptake of previously marginal reserves by HPAL facilities. However, APNI stressed the importance of ongoing monitoring to assess the policy's impact on realized prices, traded volumes, and state revenue collections—reflecting the government's dual mandate to support domestic smelting competitiveness while protecting mining sector economics and tax base.
The timing of this adjustment aligns with Indonesia's strategic focus on vertically integrating nickel production for EV battery supply chains, a sector increasingly critical to global decarbonization infrastructure. By reducing the effective cost floor for low-grade ore, the government aims to strengthen the competitive positioning of domestic HPAL operators against international competitors while potentially increasing ore utilization rates across Indonesia's laterite nickel deposits.
The revision directly addresses operational challenges facing Indonesia's high-pressure acid leach (HPAL) smelters, which process low-grade ore into materials used in EV battery manufacturing. According to Arief Perdanakusumah, chairman of industry group FINI, the previous pricing formula had become untenable for operators facing compounding cost pressures, particularly elevated sulphur prices resulting from the geopolitical situation in the Middle East. The new formula will lower ore acquisition costs alongside taxes and royalties tied to limonite feedstock, providing what industry stakeholders describe as "operational certainty" and reducing exposure to cash flow deficits.
The Indonesian nickel miners association (APNI) acknowledged the economic rationale for the adjustment, noting that a "formula better aligned with the economics of limonite could expand the utilisation of low-grade ore reserves" and drive uptake of previously marginal reserves by HPAL facilities. However, APNI stressed the importance of ongoing monitoring to assess the policy's impact on realized prices, traded volumes, and state revenue collections—reflecting the government's dual mandate to support domestic smelting competitiveness while protecting mining sector economics and tax base.
The timing of this adjustment aligns with Indonesia's strategic focus on vertically integrating nickel production for EV battery supply chains, a sector increasingly critical to global decarbonization infrastructure. By reducing the effective cost floor for low-grade ore, the government aims to strengthen the competitive positioning of domestic HPAL operators against international competitors while potentially increasing ore utilization rates across Indonesia's laterite nickel deposits.
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