- Indonesia lowers corrective factor for limonite containing 1.2% nickel
- New formula reduces benchmark ore prices by around 45%
Indonesia’s Ministry of Energy and Mineral Resources (ESDM) has revised the nickel ore benchmark pricing (HPM) formula, lowering the corrective factor applied to low-grade nickel ore, or limonite, and easing feedstock costs for high-pressure acid leaching (HPAL)-based producers. The revised formula came into effect on 15 September 2026.
For limonite containing 1.2% nickel, the corrective factor has been reduced to 14% from 26%. The factor applied to other mineral content in low-grade nickel ore, including cobalt, has also been lowered to 17% from 30%.
The revision is expected to reduce benchmark prices for low-grade nickel ore, along with the associated taxes and royalties.
According to Shanghai Metals Market (SMM), the revised formula puts the HPM for 1.2% Ni ore at around $24.89/wmt, approximately 45% lower than the previous benchmark.
HPAL smelters welcome lower feedstock costs
The Indonesian nickel smelters’ industry group FINI welcomed the revised pricing mechanism, stating that it would provide greater operational certainty for HPAL producers. Limonite is primarily used as feedstock in the high-pressure acid leach (HPAL) process to produce nickel intermediates used in EV battery supply chains.
FINI chairman Arief Perdanakusumah said the previous pricing formula had increased feedstock costs at a time when HPAL operators were already facing higher sulphur prices amid the war in the Middle East.
The lower limonite benchmark is therefore expected to ease feedstock cost pressure and reduce the risk of operating losses and cash-flow deficits for HPAL facilities.
Lower ore prices could improve HPAL economics
The revised formula could improve the economics of low-grade ore utilisation in Indonesia. Lower benchmark ore prices would reduce the raw-material cost burden for HPAL operators and could make previously marginal limonite resources more economically viable.
Indonesia’s nickel miners’ association APNI said the impact of the revision should be monitored through changes in realised ore prices, traded volumes and government revenue.
APNI also noted that a pricing formula better aligned with the economics of limonite could increase utilisation of low-grade reserves and support higher limonite consumption by HPAL facilities.
Nickel ore market remains cautious
Despite the policy revision, Indonesian nickel ore trading remained relatively subdued on 17 September, with market participants continuing to monitor RKAB approvals and potential quota adjustments.
The unchanged 1.2% Ni CIF price, despite the significantly lower revised HPM, indicates that the market is still assessing how the new benchmark will translate into actual transactions.
Nickel market sentiment remained cautious. The lower limonite HPM is supportive for Indonesian HPAL operators by reducing feedstock cost pressure, while the potential for higher ore utilisation could be negative for nickel supply fundamentals over the longer term.
However, ongoing uncertainty around Indonesian RKAB approvals and production quotas remains an important factor for the market.
Potential implications for nickel supply
The immediate objective of the revised formula is to improve the economics of Indonesia’s domestic HPAL industry rather than directly influence global nickel prices.
However, lower feedstock costs could have broader implications if they encourage higher utilisation of HPAL capacity and previously marginal limonite resources. This could support the production of nickel intermediates such as mixed hydroxide precipitate (MHP), potentially influencing the wider nickel supply chain.
The extent of the impact will depend on how the revised HPM affects actual ore transactions, HPAL operating rates, investment decisions and downstream nickel production.
For the global nickel market, the key question will be whether lower ore costs translate into higher Indonesian HPAL output. Any increase in downstream production could add to nickel supply, although the impact on prices will also depend on demand conditions and developments in other producing regions.
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