As the conflict in the Middle East continues to escalate, the risk of closure of the Strait of Hormuz could impact the raw material supply chain for Indonesia's nickel processing industry. Sulfur, a critical auxiliary material in the production of nickel using the High-Pressure Acid Leach (HPAL) process, has become a focal point of concern regarding supply stability.
Arif Perdana Kusumah, Chairman of the Indonesian Nickel Industry Forum (FINI), stated at the 9th-anniversary celebration of the Indonesian Nickel Miners Association (APNI) in Jakarta that producing one ton of Mixed Hydroxide Precipitate (MHP) requires approximately 12 tonnes of sulfur, representing a massive demand. Furthermore, around 75% of the sulfur used by Indonesian smelting companies is reliant on imports, with major sources including Middle Eastern countries such as the United Arab Emirates, Qatar, and Saudi Arabia.
According to Arif, most smelters in Indonesia currently maintain sulfur inventories of roughly one week to one month, sufficient for short-term operations. However, if the Strait of Hormuz were to be closed for an extended period, leading to a sustained supply chain disruption, the impact would gradually become apparent.
He pointed out that while many countries globally possess sulfur resources, their production capacity is limited and cannot quickly fill the supply gap left by the Middle East. Sulfur from the Middle East is primarily a byproduct of local oil refining, offering advantages in terms of scale and stability.
Arif also noted that the impact of tight sulfur supply has already been observed in other industries. He cited the example of fertilizer producer PT Petrokimia Gresik (referring to Chandra Asri Group, as context implies a major fertilizer/chemical company facing force majeure), which declared force majeure two days ago due to sulfur shortages.
He urged the industry to closely monitor geopolitical developments in the Middle East, emphasizing that this external variable poses a potential threat to raw material supplies across several industrial sectors in Indonesia. While the nickel industry has not yet experienced a substantive impact, the effects could gradually emerge if the situation continues to deteriorate.
Written by Cora Ji, jiruyan@mysteel.com
