On February 24, 2025, Indonesia's Ministry of Energy and Mineral Resources (ESDM) issued a document titled Regarding Guidelines for the Establishment of Benchmark Prices for the Sale of Metallic Mineral and Coal Commodities (No. 72.K/MB.01/MEM.B/2025). This regulation aims to establish a Mineral Benchmark Price (HPM) for mineral resources and processed products sold by IUPK/IUP holders, stating that market prices should not fall below the HPM.
On March 1, 2025, ESDM issued another document, Regarding Benchmark Prices for Metallic Minerals and Coal for the First Period of March 2025 (No. 80.K/MB.01/MEM.B/2025), which adjusted the calculation method for the Reference Mineral Price (HMA). This revision provides a basis for determining the new HPM for mineral resources and refined products.
Key Amendments
1. Modification of HMA Calculation Method
The new regulation stipulates that benchmark prices will be updated on the 1st and 15th of each month. For the first cycle, the HMA is calculated based on the average LME spot settlement prices from the 5th to the 25th of the previous month, and this HMA will serve as the basis for determining the HPM for that period. The revised calculation method will be implemented starting March 1, 2025.
2. Addition of HPM Calculation Method
The HPM price for Indonesian nickel ore, which directly determines the tax levied on nickel ore resources, has been in effect for many years. The new regulation empowers the government to adjust a correction factor (CF) to regulate HPM levels across various product categories, aiming for more precise tax assessments.
Source: Mysteel
Potential Impacts
The new pricing regulations could drive higher profits, incentivizing increased production of nickel pig iron (NPI) and nickel intermediates. In 2022-2023, the NPI market in China and Indonesia faced oversupply, which led to narrowing margins. In 2024, supply constraints in Indonesia and the phase-out of high-cost capacity led to a temporary inventory drawdown, with monthly production dropping below 120,000 tonnes in nickel content. However, as supply constraints slightly eased in Q4, Indonesia's NPI production rebounded to 147,000 tonnes in nickel content, while China saw a monthly surplus of around 20,000 tonnes in nickel content. In 2025, Indonesia is expected to add 17 new production lines.
If fully implemented, the new regulation could restore high profits, stimulating nickel production and accelerating the launch of delayed projects. However, with limited growth in China's end-user demand, higher costs may push up finished product prices, squeeze downstream margins, and exacerbate the risk of oversupply.
In addition, Indonesia's nickel HPM is tightly linked to resource tax, meaning that every step, from extraction to sales, is under strict regulatory oversight. This rigorous control may influence capacity and production growth for foreign investors in the refining sector, even as it is a pioneering industry. With the most refined nickel destined for export, recent moves, such as exploring nickel pig iron export taxes since 2022 and adjustments in foreign exchange controls, underscore the importance of monitoring Indonesia's policy changes.
Written by Cora Ji, jiruyan@mysteel.com
