Analysis of the Impact of Indonesia's Hydrometallurgical Nickel Smelting on Global Sulfur Supply and Demand

Based on the collected data, I am now compiling a detailed analysis report for you.

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As the country with the world’s richest nickel resource reserves and largest nickel ore production, Indonesia is leading the global nickel industry’s transformation from traditional pyrometallurgical smelting to hydrometallurgical smelting.

has become the mainstream technical route for processing Indonesia’s low-grade laterite nickel ore. This process can effectively recover valuable metals such as nickel and cobalt, with low energy consumption and low carbon emissions, and has significant cost advantages [1].

According to industry data, Indonesia’s MHP (nickel sulfate-containing) output has rapidly increased from approximately

in 2023 to approximately in 2024, representing a year-on-year growth of approximately [1]. This rapid growth trend reflects that Indonesia’s strategic position in the new energy industry chain is significantly improving.

Indonesia’s existing and under-construction HPAL projects are showing an accelerated launch trend:

Project	Region	Product	Nickel Capacity (10,000 metal metric tons)	Commissioning Time
Huayue	Morowali	MHP	6	End of 2021
Huafei	Weda Bay	MHP	12	Mid-2023
Liqin OBI Phase III	OBI	MHP	12	July 2024
Qingmeibang Phase II	Morowali	MHP	6.5	September 2024
PT Meiming	Morowali	MHP	2.5	End of 2024
Indonesia Chenxi	Weda Bay	MHP	6.7	2025
ENC	Morowali	MHP/Nickel Sulfate	7.2	Q4 2025

: By the end of 2025 to 2026, Indonesia still has approximately of nickel capacity to be put into operation [1].

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One of the core characteristics of the HPAL process is

. According to industry estimates, [1]. Combined with the rapid expansion of Indonesia’s MHP capacity, this process characteristic has had a profound impact on the global sulfur market.

Based on Indonesia’s 2024 MHP output of 323,000 metal metric tons,

. If Indonesia’s MHP capacity is further released to approximately 600,000 metal metric tons in 2025, sulfuric acid consumption will climb to approximately 18 million metric tons, corresponding to a sulfur demand of approximately 6 million metric tons.

According to forecasts from industry research institutions,

[2]. This increment mainly comes from:

1. Continuous ramp-up of existing capacity
   : Sustained improvement in capacity utilization of projects such as Huayue and Huafei
2. Contribution of newly commissioned projects
   : Capacity release from projects such as Qingmeibang Phase II and Liqin OBI Phase III
3. Expectations of to-be-commissioned projects
   : Approximately 300,000 metal metric tons of capacity to be released between 2025 and 2026

The downstream demand of the sulfur industry chain presents a

:

• Agricultural sector
  : Accounts for approximately 60% of total sulfur demand, mainly used for the production of ammonium phosphate and compound fertilizers
• New energy sector
  : Accounted for approximately 5% of demand in 2024, expected to rise to
  8%
  in 2025, with the fastest growth rate
• Industrial sector
  : Titanium dioxide, caprolactam, etc. account for approximately 6%-7%

For the rapid growth of demand in the new energy sector,

[2].

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Global sulfur supply presents the following characteristics:

1. Low supply elasticity
   : 98% of global sulfur comes by-product from desulfurization in oil refining, natural gas, and coal chemical industries, with natural sulfur accounting for less than 2% [2]
2. Limited increment
   : Global output is expected to reach 80.7 million metric tons in 2024 (year-on-year +2%), with the increment mainly coming from the 1.5 million metric ton capacity ramp-up of Kuwait’s Az Zour Refinery in the Middle East
3. Geopolitical disturbances
   : Russia’s output has decreased by approximately 1 million metric tons due to refinery attacks, and recovery is expected in March 2025

Global sulfur demand is expected to reach

in 2024 (year-on-year +5%), with , and China (lithium iron phosphate raw materials) and Indonesia (MHP projects) as the core sources of increment.

Indicator	2024 Data
Global Sulfur Output	80.7 million metric tons
Global Sulfur Demand	81 million metric tons
Supply-Demand Gap	2.2 million metric tons

The global sulfur demand increment is expected to be approximately

between 2025 and 2026 (1 million metric tons from China + 3 million metric tons from Indonesia), while the supply side can only add approximately 2 million metric tons (450,000 metric tons from China + 1.5 million metric tons from overseas). [2].

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Sulfur prices have seen a

:

• Mainstream price of sulfur granules at Zhenjiang Port:
  RMB 4,150 per metric ton
  (December 2025 data)
• Surge of over 320% from the low of less than RMB 1,000 per metric ton in the second half of 2024
• Middle East sulfur contract prices hit a new high: December contract prices in Qatar, Kuwait, and the UAE are all
  FOB USD 495 per metric ton
  , a significant month-on-month increase of approximately 24%

The surge in sulfur prices has had a significant impact on downstream industries:

1. Phosphate fertilizer industry
   : As the largest downstream sector of sulfur (accounting for over 50% of consumption), it is under cost transmission pressure. Based on process consumption ratios, for every RMB 100 per metric ton increase in sulfur prices, the production cost of phosphate fertilizers increases by approximately RMB 45 per metric ton.
2. Titanium dioxide industry
   : Producing 1 metric ton of titanium dioxide requires approximately 2.5-4 metric tons of sulfuric acid. The rise in sulfur prices has driven titanium dioxide enterprises to announce six rounds of price increases within the year.
3. Battery materials
   : The proportion of sulfur in the “non-lithium costs” of lithium iron phosphate has increased from approximately 1% to approximately 6%, but as lithium sources still account for 40%, the overall impact is controllable.

China’s sulfur import dependency has long remained at approximately

, with imports of approximately in 2024, and an import dependency rate of 52.17%. The rise in sulfur prices has the following impacts on China’s related industries:

• Port inventories are at a low level (approximately 2.2 million metric tons, below the reasonable level of 2.4 million metric tons)
• Import sources are tilting towards non-mainstream regions such as Oman and Kazakhstan
• Mainstream Middle East supplies are flowing more to Indonesia’s market with stronger purchasing power due to higher prices

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1. Short-term (2025-2026)
   : The supply-demand gap will persist, prices will fluctuate at a high level, and the price center is expected to be
   RMB 2,000-4,000 per metric ton

2. Medium-term (2027-2030)
   : A period of concentrated capacity release for Indonesia’s HPAL projects, with rigid growth in sulfur demand that the supply side cannot match

3. Long-term
   : New energy demand (battery materials) and Southeast Asian industrialization will become the core growth engines for sulfur demand

1. Indonesian policy trends
   : Adjustments to nickel ore quotas and changes in export policies will affect the commissioning pace of HPAL projects
2. Geopolitical risks
   : Supply stability of major sulfur-producing countries such as the Middle East and Russia
3. By-product acid from copper smelting
   : Copper smelting TC fees are at a historical low (-USD 40 per dry metric ton), and the supply of smelting acid supports sulfuric acid prices
4. Development of alternative technologies
   : Changes in cost competitiveness of technologies such as pyrite-based sulfuric acid production and waste acid recovery

1. Focus on Indonesia’s nickel industry supply chain
   : Companies such as GEM and Qingmeibang that have laid out HPAL projects in Indonesia have resource acquisition advantages
2. Sulfur prices operating at a high level
   : Sulfur-producing enterprises such as Sinopec, CNPC, and Rongsheng Petrochemical will continue to benefit
3. Cost transmission in the phosphate fertilizer industry
   : Focus on phosphate fertilizer enterprises with integrated sulfur-to-sulfuric acid production capacity
4. Sulfuric acid trade opportunities
   : Regional supply-demand imbalances will bring cross-regional arbitrage opportunities

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The rapid rise of Indonesia’s hydrometallurgical nickel smelting industry has become a

. Driven by the high acid consumption characteristic of the HPAL process, the capacity expansion of Indonesia’s MHP projects will contribute millions of metric tons of annual increment to global sulfur demand. At the same time, the sulfur supply side is constrained by the low elasticity of by-product supply and geopolitical disturbances, making it difficult to match the rapid growth in demand, leading the global sulfur market to enter a state of .

This evolution of the pattern will profoundly affect the cost structure and profit distribution of the sulfur and downstream industrial chains such as phosphate fertilizers, titanium dioxide, and battery materials. For investors, in-depth understanding of the linkage between Indonesia’s nickel industry and the sulfur market will help grasp investment opportunities in the commodity cycle.

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[1] Guosen Securities - Mid-2025 Investment Strategy Series Report for the Metals Industry: Energy Metals (https://pdf.dfcfw.com/pdf/H3_AP202507021701495153_1.pdf)

[2] Laosijia Jiache - Supply and Demand Analysis and Outlook for the Sulfur Industry (https://finance.sina.com.cn/roll/2025-11-13/doc-infxhcvv2488633.shtml)

[3] Securities Times - Sulfur Prices Surge Over 320% to Hit a New High (https://www.stcn.com/article/detail/3533606.html)

[4] Minmetals Futures - Nickel: Indonesia’s Intermediate Product Capacity Still Has Room for Release (https://www.minfutures.com/ueditor/jsp/upload/file/20250226/1740530311776062649.pdf)

[5] CITIC Futures - Base Metals Market Daily Report (https://pic-test-gjmetal-1324067834.cos.ap-shanghai.myqcloud.com/newsv2/62e9901e5ab34e959f283d2110c3009a20260108083012.pdf)