Indonesia hikes nickel ore benchmark price in hit to processors

Indonesia will hike benchmark prices for nickel ore, further weighing on local processors facing cost pressures from the Middle East war.

The new formula, which takes effect on Wednesday, will raise the price floors for all grades of nickel ore, according to a presentation from the country’s Energy and Mineral Resources Ministry. The cost of byproduct metals contained in the ore, including cobalt, will also now be added to the benchmark.

Indonesia’s energy minister last month said the government was planning to raise benchmark prices. The resource-rich country has been seeking additional state revenue as it faces rising budgetary strain from higher oil prices due to the Iran war.

The move will be a setback for the top nickel producer’s vast processing industry, which accounts for more than half of global output. While tighter mining quotas have already pushed the cost of high grade ore well above the government benchmarks, lower grade material will likely see a price increase.

That low-grade ore is typically bought by high pressure acid leach plants, which process it into a form of nickel used by electric vehicle battery makers. They’re already suffering from a sharp increase in the price of sulfur — a key reagent — as the Iran war keeps Persian Gulf supplies off the market.

Nickel futures rose as much as 2.6% to a one-month high on the London Metal Exchange on Monday, after Shanghai Metals Market earlier reported the decision.

Indonesia’s benchmark prices set the minimum a smelter can pay miners for their ore. They vary based on LME prices and are set twice a month.

(By Eddie Spence)