Indonesia’s Huafei to Cut MHP Output on Sulphur Costs

Why It Matters

Elevated sulphur costs threaten the economics of HPAL‑based nickel production, a key feedstock for EV batteries, and could tighten supply if the suspension extends. Huayou’s mitigation plans signal a shift toward more resilient, lower‑cost processing routes across the battery‑materials sector.

Key Takeaways

• Huafei will idle half of 180k t/yr MHP capacity from May.
• Sulphur price jumped 84% to $948/ton, now 35‑40% of HPAL costs.
• MHP offers rose to 95% of LME nickel, boosting market sentiment.
• Huayou plans pyrite‑based acid projects by 2026 to cut sulphur exposure.

Pulse Analysis

The recent escalation of the US‑Iran conflict has choked the Strait of Hormuz, driving global sulphur prices to $948 per tonne—an 84% increase since February. Sulphur, a critical input for high‑pressure acid leaching (HPAL) used in nickel‑MHP production, now accounts for up to 40% of processing costs. Indonesia, which imports roughly 75% of its 5.34 million tonnes of sulphur from the Middle East, is especially vulnerable, prompting producers to reassess cost structures and supply chains.

Huafei’s decision to place half of its 180,000‑tonne‑per‑year MHP capacity on temporary standby reflects the immediate pressure on margins. While the company assures the move is short‑term, the suspension has already buoyed market sentiment, with MHP offers climbing to 95% of LME nickel prices—a notable premium over the 91% level seen in March. This price uplift underscores the market’s anticipation of tighter supply, which could ripple through the EV battery ecosystem where nickel‑MHP is prized for its high energy density.

In response, Huayou is accelerating process upgrades and diversifying its acid supply by developing pyrite‑ and phosphogypsum‑based production facilities, targeted for commissioning by the end of 2026. These projects aim to decouple nickel processing from volatile sulphur markets, offering a more stable cost base and reducing geopolitical risk. The strategy mirrors a broader industry trend toward alternative leaching chemistries, positioning producers that adopt such innovations to maintain competitiveness as demand for battery‑grade nickel continues its rapid ascent.