Rising Indonesian costs may curb appeal of nickel-based EV batteries
Saturday, May 2 2026 - 08:58 AM WIB
Nickel-based batteries risk losing further market share as rising production costs in Indonesia—source of a key battery input—pressure the economics of the supply chain, industry participants and analysts said, as reported by S&P Global Commodity Insights.
Higher input costs have pushed up prices for mixed hydroxide precipitate (MHP), an intermediate product used in electric vehicle (EV) batteries. Indonesia, the world’s largest nickel producer, hosts multiple high-pressure acid leach (HPAL) operations that produce MHP from laterite ore.
HPAL plants rely on sulfur, largely sourced from the Middle East, to process ore, but regional conflict has tightened supply and driven up costs. At the same time, Indonesia’s new nickel ore benchmark pricing formula, introduced on April 15, is expected to lift feedstock prices further.
While higher MHP prices may help sustain Indonesian HPAL operations, rising costs could prompt EV makers to shift toward battery chemistries that use less nickel.
“Such a squeeze would likely accelerate the global shift toward alternative battery chemistries,” said Joenelle Donato, an analyst at S&P Global Commodity Insights’ CERA.
Platts, part of S&P Global, assessed MHP CIF North Asia at 92.5% payables on April 29, up from 90.1% at the start of the year and well above the 79.6% average for 2023–2025. The all-in MHP price was assessed at $15,806 per metric ton, up 17.9% since early 2026.
MHP has become a preferred feedstock in Asia due to its cost advantage in producing battery-grade nickel sulfate compared with refining pure nickel metal, according to the Nickel Institute.
However, that advantage may narrow as rising sulfur and ore costs weigh on HPAL economics. Some operators may consider cutting output, while new projects could face delays, said Arief Tiammar, an advisory board member of the Indonesian Metallurgical Professional Association (Prometindo).
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Platts assessed Middle East FOB solid sulfur prices at $469 per metric ton on April 23, up 71.8% from February 8. Meanwhile, Indonesia’s revised ore pricing framework is expected to roughly double limonite ore prices, according to a CERA report dated April 17. Ore prices had already been elevated due to government production curbs.
“Rising prices of sulfuric acid and limonite ore will erode the profits of HPAL plant owners,” Tiammar said.
Despite the cost pressure, HPAL operators can remain viable as long as margins hold and MHP payables stay elevated, said Michael Insulan, vice president of commercial operations at Electra Battery Materials.
Still, higher costs are expected to weigh on the competitiveness of nickel-based batteries, particularly against lithium iron phosphate (LFP) chemistries, which are gaining market share due to lower costs.
“Increased feedstock and sulfur costs raise pressure on nickel-bearing lithium-ion batteries and make LFP batteries more attractive,” Insulan said.
Nickel-based batteries accounted for 50% of the global EV battery market in 2024, down from 59% in 2023 and 63% in 2022, according to the International Energy Agency. In contrast, LFP batteries’ share rose to 50% in 2024, from 41% in 2023 and 38% in 2022.
Beyond LFP, sodium-ion batteries are also emerging as an alternative, particularly due to better performance in colder climates, the IEA said.
Operators may partially offset higher costs by optimizing feedstock, such as prioritizing limonite ore with lower magnesium oxide content to reduce sulfuric acid consumption, said Brandon Colwell, chief executive of Nusa Nickel Corp.
“Sulfur remains a key vulnerability, but the cost burden is not entirely fixed,” Colwell said. “Part of the impact can be mitigated through feed optimization.”
Still, weakening demand prospects could limit producers’ ability to pass on higher costs.
“With rising risks of a global economic slowdown linked to the Middle East conflict, demand for premium EV models—where nickel-intensive batteries are mainly used—is unlikely to strengthen in the near term,” said Linghui Ni, an analyst at consultancy Project Blue. “This will make it increasingly difficult for nickel producers to pass through higher costs.”
Editing by Reiner Simanjuntak