Jakarta, TAMBANG, – Indonesia is blessed with quite large nickel resources and reserves. Along with the downstream policy that is consistently implemented, the nickel processing and refining industry has grown quite massively. If previously nickel was only a raw material for stainless steel, now nickel has become an important raw material for electric vehicle batteries.
Low grade nickel (limonite) which was previously unused is now useful for refineries High Pressure Acid Leaching (HPAL). Currently there are 7 HPAL factories operating and it is planned that this year there will be an additional 3 new factories in production. HPAL itself is a key element in Indonesia’s nickel downstream strategy. HPAL is driven with the aim of integrating the mining sector with the electric vehicle (EV) battery industry as a whole.
In contrast to pyrometallurgical technology which produces products such as NPI or FeNi, HPAL is designed to process limonite-type laterite nickel ore into intermediate products (intermediate) which can continue to be downstreamed into active battery material.
HPAL’s main products, namely Mixed Hydroxide Precipitate (MHP), is a strategic raw material which is then processed into Mixed Sulphide Precipitate (MSP). Can also be directly converted to Nickel Sulphate (NiSO₄) and Cobalt Sulphate (CoSO₄). These two products are the main components of lithium‑ion battery cathodes, especially for NMC chemistry (Nickel‑Manganese‑Cobalt) and NCA (Nickel‑Cobalt‑Aluminum) which currently dominates the global EV market.
Thus, HPAL acts as the most critical link between Indonesia’s limonite nickel mines and the world’s battery and automotive industries.
In many projects, HPAL does not stand alone, but is part of an integrated EV industrial ecosystem, which includes limonite mines, HPAL smelters (MHP/MSP), nickel & cobalt sulfate factories, precursor and cathode factories, to battery cell and electric vehicle factories.
Therefore, the economic sustainability of HPAL will greatly determine the competitiveness of the entire Indonesian EV battery value chain. Any cost pressure on HPAL has the potential to create a domino effect downstream, from cathode prices to investment feasibility in EV manufacturing.
Please note, HPAL is a technology with a high level of complexity and investment risk. The construction of a commercial scale HPAL facility requires a need Capital Expenditure around US$ 2.5 – 4.0 billion per plant. Typical capacity is between 40,000-60,000 tons of Ni per year in the form of MHP equivalent to IDR 42.5 trillion-IDR 68 trillion, which is very expensive compared to other downstream investments.
Investment components include high pressure autoclave units, acid plants and sulfuric acid utilities, neutralization & tailings systems, power and steam plants and ports and supporting infrastructure.
The large and irreversible characteristics of CAPEX make HPAL very sensitive to changes in operating costs (OPEX) and raw material price policies.
Three problems facing the HPAL Industry
In recent times, business actors, especially companies building HPAL factories, have complained about the supply of sulfur and its soaring prices. As is known, the HPAL process relies heavily on sulfuric acid as reagent main leach. To produce 1 ton of nickel in MHP form, around 10–12 tons of sulfur are needed as raw material for sulfuric acid. With a consumption ratio of this size, fluctuations in the price of sulfur and sulfuric acid immediately have a major impact on production costs.
“Entering 2026, the global market for sulfur and sulfuric acid will experience an extreme surge. This is triggered by supply chain disruptions from the Middle East, geopolitical escalation around the Strait of Hormuz and Indonesia’s high dependence on sulfur imports,” explained Edi Permadi, Professional Expert at the Indonesian National Resilience Institute (Lemhanas).
It was explained that the price of sulfur had jumped from around US$275/ton to US$960–1,300/ton. Meanwhile, the price of industrial sulfuric acid increased to US$800–910/ton.
This increase in sulfur prices has an impact on HPAL’s Cash Cost. The portion of sulfuric acid costs increased to 65–70% of MHP’s total cash costs. Previously it was only around 35–40% under normal conditions. MHP production costs increased to the range of US$ 2,400–2,600 per ton of Ni.
“This situation makes sulfuric acid the most dominant cost driver in HPAL’s current cost structure,” he stressed.
Another challenge also comes from rising fuel and energy prices. Fuel and energy still play an important role in HPAL operations, although not as dominant as sulfuric acid. Fuel is used for limonite mining and hauling activities, backup generators, auxiliary boilers and chemical internal logistics and steam support systems.
“The increase in global oil prices during 2025-2026 will push up the price of non-subsidized industrial fuel in Indonesia. The impact is energy costs such as fuel, electricity and steam which contribute around 10-20% of HPAL’s total cash costs. This increase is incremental, but significant in conditions of increasingly thin margins,” stressed Edi, who has been involved in the mining sector for a long time.
It doesn’t stop there, starting April 15 2026 the government has also implemented a new HPM formula which includes an increase in the Corrective Factor (CF), monetization of associated minerals (Fe, Co, Cr), a change in units from DMT to WMT. This reform aims to increase price fairness and state revenues.
However, this policy change then had an impact on the price of limonite ore (HPAL). “For HPAL, the impact is very significant starting from the price of limonite ore increasing sharply, in many cases >100% cobalt content is now fully calculated in HPM, the cost of raw materials increases along with the increase in costs. reagent. “This combination pushes MHP production costs closer to LME nickel prices, so HPAL margins are under very heavy pressure,” stressed Edi.
The same thing also happens to saprolite ore with Impact on Saprolite Ore (RKEF). As a comparison, saprolite ore also experienced an increase in HPM, the impact was more pronounced in RKEF/NPI, not exposed to sulfuric acid, but very sensitive to energy and ore prices.
This situation triggers a decline in HPAL project margins to the point that it is not feasible. This will of course have a further impact on delays in investment decisions (FID) for new projects, renegotiation of contracts between mines and smelters and the risk of decreasing factory utilization.
Edi explained that in the long term HPAL remains irreplaceable in Indonesia’s strategy to build the EV battery industry. However, conditions in 2026 show that HPAL is a project high‑risk, high‑capital, and highly policy‑sensitive. Another thing is that the sustainability of HPAL determines the resilience of the entire national EV battery value chain. Meanwhile, unmanaged cost pressures have the potential to weaken the competitiveness of downstream industries.
“In the future, HPAL’s success will be largely determined by integration acid plant and energy, diversification of sulfur sources and harmonization of upstream–downstream policies. “What is being done is supporting the transition so that Indonesia’s EV battery ecosystem grows economically and sustainably,” said Edi.
According to Edi, this step can be taken into consideration in reviewing the overall conditions from upstream to downstream of every policy that will be taken in the future and also making corrections to what has already occurred.
Source: tambang.co.id
