Indonesia's aggressive nickel intermediate capacity expansion program is encountering real-world constraints. Planned mixed hydroxide precipitate (MHP) and nickel matte additions totaling 200,000 tonnes/year — critical for feeding the global battery supply chain — face significant delays due to power infrastructure gaps and environmental permitting bottlenecks.
The power constraint is particularly acute in Sulawesi, where most nickel processing is concentrated. The state utility PLN has struggled to bring 450 MW of new coal and gas capacity online to serve HPAL plants. Two new HPAL facilities (planned aggregate capacity: 80,000 tonnes/year MHP) have delayed commissioning by 6-9 months due to insufficient power supply.
Environmental permit delays are compounding the problem. The Ministry of Environment has tightened scrutiny of tailings management plans for HPAL operations following a spill incident in Q4 2025. Three expansion projects representing 120,000 tonnes/year of intermediate capacity are awaiting permits that were expected in Q1 2026.
The MHP premium over LME nickel narrowed to $1,200/mt from $1,500/mt in May, suggesting that intermediate supply has not tightened as much as refined supply. However, if the delays persist, battery manufacturers may face feedstock shortages by Q4 2026.
Indonesia's power and permitting bottlenecks mean that battery nickel supply growth will be slower than planned. Procurement teams should build inventory reserves for Q4 2026-Q1 2027, when intermediate supply could tighten. Consider diversifying offtake sources beyond Indonesia — Australia and Canada HPAL projects offer alternative supply albeit at higher cost.