Indonesia has released a series of regulations related to the nickel sector in the past few months, which could raise the cost of production for all nickel products, potentially driving up these products' prices.
The Indonesian government in March introduced a new price guideline, Harga Mineral Acuan (HMA), and proposed changing the non-tax state revenue or Pendapatan Negara Bukan Pajak (PNBP) royalty rates for nickel products. Export earnings were also extended to be held onshore from three months to a year, effective from 1 March. Indonesia in July 2024 also implemented Simbara, a digital monitoring system for the Indonesian mineral and coal mining sector to collect revenues more efficiently.
This series of changes sparked concerns in the market, with participants expecting the regulations to cause a potential increase in production costs and operating costs.
The new royalty is proposed to have progressive tiers, which will increase in tandem with nickel ore prices. If the HMA falls below $18,000/t, nickel ore's royalty rate was suggested to be revised from 10pc to 14pc, which would increase production costs of NPI by $200/t, according to Argus' calculations. Operation costs would climb higher when the HMA increases above $18,000/t, further weighing on profit margins.
Nickel pig iron (NPI) is typically the cheapest nickel product because of a supply glut since 2022. But the price outlook of NPI could be higher in the long term, given the changes in Indonesian regulations and a projected lower oversupply of NPI in 2025 given tighter ore supply.
The price gap between NPI and London Metal Exchange (LME) nickel prices is expected to narrow following the change in HMA, which would eventually affect the calculation of the nickel benchmark price, or the Harga Patokan Mineral (HPM).
The LME cash official nickel price rose to $16,455/t on 12 March from $15,587/t on 3 March, supported by the series of regulations. This is in line with Argus-assessed NPI ex-work prices in China which has increased to 1,000-1,020 yuan/metric tonne unit (mtu) ($138-141/mtu) including 13pc value-added tax on 13 March from Yn980-990/mtu on 4 March.
The HMA for the second half of March is expected to be higher than the first half, in the face of rising LME prices, which would further increase the production costs of NPI.
| Timeline of regulations on nickel | ||
| Date | Name | Snapshot |
| Mar-24 | A mineral and coal Information system (Simbara) | A digital monitoring system for the Indonesian mineral and coal mining sector |
| Jan-25 | Extend the holding period of deposits | Extended the holding period of deposits made on export sales of natural resources from three months to one year, as a way of increasing foreign currency reserves and strengthening the economy |
| Effective from 1 March 2025 | Harga Mineral Acuan (HMA) | This new reference pricing is expected to reflect market conditions and prices more accurately, given the shorter calculation period. |
| 8-Mar-25 | The non-tax state revenue or Pendapatan Negara Bukan Pajak (PNBP) | Base on the above profilo regulations, there is a sound basis for taxation, including the tax base and tax rate. |
| Source: ESDM | ||
