Steep increases in sulphur prices, against expectations of lower future nickel demand, and falling nickel prices since last year are pressuring metals producers in Indonesia, and some are considering postponing new projects.
Sulphur is used as a raw material in the production of nickel intermediates such as nickel matte and mixed hydroxide precipitate (MHP), through the rotary kiln-electric furnace (RKEF) and high-pressure acid leaching (HPAL) processes, respectively. Producing 1t of MHP or nickel matte requires an estimated 10t and 15t of sulphur, respectively.
Global sulphur prices began to rise in mid-2024 on firmer demand from Morocco and Indonesia. Morocco's OCP started up two sulphur burners last year that will consume 967,000 t/yr of sulphur at capacity. In Indonesia, newly commissioned HPAL production lines at QMB New Energy Materials and Halmahera Persada Lygend also added an estimated 830,000 t/yr of sulphur demand.
Uncertainty over Kazakh and Russian sulphur export availability because of EU sanctions also created uncertainty over available supply in the region. Tighter supply, compounded by competing Chinese and Indonesian demand after the Lunar New Year holidays, spurred a rally in sulphur prices in the first quarter of the year.
Fob Middle East sulphur prices more than tripled to $285.5/t fob as of 1 May from $86/t a year earlier, Argus assessments show. Cfr Indonesia granular sulphur prices rose by $185/t to $297/t cfr over the same period.
While sulphur prices have risen significantly over the past year, prices for Indonesian-origin nickel intermediates have been largely rangebound at $12,000-14,000/t of nickel contained since January 2024. The comparatively flat nickel prices and the rising raw material prices mean that producers' margins are narrowing further. Gross profit margins for MHP products were close to $10,000/t in 2023 before falling to around $7,000/t in 2024, according to Argus estimates.
Current sulphur prices take up around 40pc of the total production cost of nickel matte, the largest portion out of other raw materials such as caustic soda, according to one metals producer.
And the increased adoption of non-nickel containing battery chemistries such as lithium-iron-phosphate and higher demand for plug-in hybrid electric vehicles have led the industry to revise its expectation of future nickel demand from the battery section. The International Nickel Study Group has forecast a nickel market surplus of 198,000t for 2025, rising from 179,000t in 2024. But new ternary precursor cathode active materials projects will support a rise in nickel usage in the medium term, the group said.
As higher raw material prices continue to chip away at producer margins, upcoming projects including QMB New Energy Materials' phase 3 in Morowali, and developments by Guangqing and Blue Sparkling Energy in Weda Bay may have to be postponed, market participants said. The three projects are expected on line this year, adding 844,000 t/yr of sulphur demand at capacity.
