Indonesia is likely to expand its mixed-hydroxide-precipitate (MHP) plant capacity further in 2026, supported by record-high cobalt prices and strong production economics, a move that could deepen nickel oversupply and weigh on prices.
Current output
Indonesia's MHP output is projected to reach 482,000t in nickel metal equivalent this year — almost a 50pc rise from 2024, according to Argus estimates. Argus-assessed 37pc nickel payable MHP prices have fallen by 2.6pc on the year to $127.40/metric tonne unit (mtu) so far in 2025, while Class 1 nickel prices have dipped from $17,000/t to around $15,350/t over the same period.
Nickel prices will likely remain depressed in the low-$15,000s/t range in 2026 because supply expansion is outpacing demand growth. Demand has slowed as the electric vehicle (EV) market growth has cooled in recent years, with annual growth in global EV car sales slowing from 26pc in 2024 to 23pc in 2025.
Nickel demand growth could also face further headwinds from increasing competition from other battery types such as nickel-free lithium-iron-phosphate and high-manganese chemistries. This could increase the nickel surplus, further weighing down on overall nickel prices.
Indonesia has consolidated its position as the leading global MHP supplier after most Western plants halted operations in late 2023. The country currently hosts around 10 operating MHP projects with a combined designed capacity of about 440,000 t/yr of nickel. Most projects are owned by Chinese giants Ningbo Lygend, Green Eco-Manufacture (GEM), and Huayou, in collaboration with local producers Merdeka, Harita Nickel, and PT Vale Indonesia (PTVI).
MHP capacity expansion
More MHP projects are expected in the near-term, bolstered by elevated cobalt prices, as MHP typically contains 2-5pc of cobalt.
Refineries have been seeking cobalt alternatives because of constrained supply following export restrictions imposed by the Democratic Republic of Congo (DRC) since February. Indonesia's cobalt feedstock capacity is projected to hit around 65,000 t/yr in 2026, while global cobalt supply is expected to hit 210,000t over the same period, according to Argus data.
The lucrativeness of MHP in comparison with other nickel products, such as nickel pig iron (NPI), is another driver for investment.
- MHP production cost: $10,500–11,000/t (December estimate)
- Processing cost to convert MHP into nickel metal: $3,000–3,500/t
- Total cost for MHP to nickel metal: $13,500–14,500/t
- NPI to nickel metal cost: $14,000–14,500/t
Additionally, cobalt by-product sales (around $2,000/t) help offset MHP production costs, effectively reducing net costs to $11,500–12,500/t, making MHP more lucrative than NPI.
Outlook
Concerns are mounting that rapid expansion of Indonesia's MHP capacity will further pressure on nickel prices.
Argus forecasts Indonesia's MHP capacity to nearly double on the year to 862,000 t/yr in 2026, as several HPAL projects are scheduled to be commissioned in 2026. While not all capacity will translate into production, any additional output will add to an already oversupplied market, intensifying the glut. The overall nickel surplus is estimated at 212,000t in 2025 and is projected to reach 288,000t in 2026, according to Argus data.
Indonesia has tightened its efforts to regulate nickel pricing and oversupply this year, reverting the validity period for RKAB mining quotas to one year. The government also suspended some nickel mines due to a lack of reclamation and post-mining guarantees, while lands were seized from Weda Bay Nickel and Tonia Mitra Sejahtera for lacking forestry permits.
These policy changes have yet to significantly impact nickel prices, but remain critical factors that could disrupt supply and influence the price outlook.
