MHP emerges as preferred route to sulfate for international nickel market

Mixed hydroxide precipitate (MHP) is increasingly emerging as the preferred nickel intermediary product for nickel sulfate producers in China and beyond

Mixed hydroxide precipitate (MHP) is increasingly emerging as the preferred nickel intermediary product for nickel sulfate producers in China and beyond, Fastmarkets understands. Companies are now opting for MHP over other traditional routes such as nickel metal (briquettes) and nickel matte.

MHP is not a new product within the nickel market, and is sourced from nickel laterite ores, with the bulk of production found in Indonesia.

While not new, the production and demand for MHP is set to increase exponentially. On the production side, MHP output has increased by 1,691% since 2011 to the 113,500 tonnes expected to be produced in 2022, according to Fastmarkets research.

Currently, much of the demand for nickel sulfate can be found in the domestic Chinese market.

But there is a growing expectation among market participants as Western nations begin to catch up in regard to battery production and consumption that a liquid spot market for nickel sulfate will emerge internationally in the next few years, as both production and demand increase.

“We firmly believe the international sulfate [spot] market will develop in 2024-2025,” one cathode active material producer source told Fastmarkets.

There has a been a scramble throughout 2022 among many large automotive companies and battery producers to enter supply agreements for key materials such as lithium as downstream producers look to shore up their supply chains.

A similar situation has occurred in nickel, with many large multi-national automotive companies signing key supply agreements for nickel production.

Ford, Tesla, Volkswagen, Britishvolt and many more have announced significant investments into developing and securing supply from Indonesia, much of which is linked directly to MHP.

While a broad suite of nickel products, including nickel matte and briquettes, will be required to truly meet the demand of the battery industry for nickel without disrupting supply of material, consumers are beginning to voice increasing confidence in the viability of MHP.

Speaking on the sidelines of the Fastmarkets Lithium Supply & Battery Raw Materials conference in Phoenix, Arizona, in June, consumers noted that they saw MHP as key to cost effective, steady nickel sulfate supply.

Cost effective

One of the most significant benefits that MHP provides is that it is cost effective for producers compared to other routes to sulfate such as briquette dissolution.

Underlying MHP prices are sold as payables linked to the benchmark exchange cash prices, with payables varying depending on destination and nickel content. Typically, MHP holds a nickel content of 30-40% with a lot of MHP produced also including a cobalt content of 1-10%.

At present, the payable rates for MHP are incredibly opaque with a significant split between numbers quoted within the domestic China market and the international market.

Fastmarkets understand that payables vary from 70-80% to the London Metal Exchange price at present. The July monthly average of the nickel cash price on LME was $21,458.57 per tonne.

Briquettes, by comparison, are sold at a premium to the underlying LME price and vary in costs depending on regions. For instance, Fastmarkets assessed the nickel briquette premium, in-whs Rotterdam, at $1,000-1,500 per tonne on August 2, which compares with the cif Shanghai nickel briquette premium, which was assessed at $450-500 per tonne on July 26.

Although underlying costs are significantly less for MHP, the costs of dissolution and conversion are much higher due to the higher impurities and waste that the process produces. According to market sources, dissolution costs for MHP to sulfate can range between $1,000 and $2,500 per tonne.

By comparison, Fastmarkets understands that the average cost for dissolution of briquettes globally is around $700 per tonne.

However, the underlying costs mean that it is still more economical to convert MHP to sulfate over briquettes.

Market participants also pointed out that nowadays even converting nickel matte into nickel sulfate will be more cost efficient than dissolving nickel briquettes.

“You wouldn’t dissolve nickel metal at the moment unless you had to,” a market source told Fastmarkets.

“Some battery cathode makers are even dumping their nickel briquettes into the spot market, and they even gave me an offer, but no one would take those materials at this time,” a Shanghai-based trader told Fastmarkets.


Despite the cost-effective nature of MHP as a route to nickel sulfate, there are concerns within the industry regarding the sustainability aspect of the product, particularly because of the market’s reliance on Indonesia-sourced material.

Concerns have been percolating within the market for some time now around the sustainability credentials of some nickel products. Sustainability is a top priority for automotive companies and there is a growing concern within the market around how Indonesian nickel products fit into this.

As recently as late July, a group of 54 non-governmental organizations issued a joint letter to Tesla chief executive Elon Musk, urging the automaker not to invest further in Indonesia.

However, others within the industry would argue that it is necessary to develop mines in the region quickly to meet the growing demand for supply globally as the world looks to continue the green transition.

“Sometimes in order to take two steps forward, you have to take a step back,” one miner source told Fastmarkets.

The largest area of concern for the carbon footprint of MHP is around MHP having a significantly larger moisture content than other feedstocks, increasing the need for water waste management. This water waste management also adds to the costs.

But others highlight that, in comparison to other products such as nickel matte, MHP offers a better CO2 footprint. Sources noted that nickel matte can produce up to around 60 tonnes of CO2 per tonne of nickel, due to the energy intensity of the refining process, whilst MHP is thought to be around half of this.

This lower CO2 footprint has provided some consumers with confidence that they can produce MHP sustainably.

However, as noted, this new focus on MHP has led to some difficulties within the physical market regarding supply and demand balances as the battery industry develops.

MHP conversion bottlenecks

The increased supply of MHP particularly from Indonesia has led to a surplus of the raw materials for nickel sulfate, yet the capacity of turning those materials into nickel sulfate is still limited.

Therefore, China’s nickel sulfate market, as the biggest consumer for MHP, has been experiencing tight supply of nickel sulfate since the end of July, sources told Fastmarkets.

“Right now, we only use MHP to produce nickel sulfate and we are running at the full capacity, and our offer price is still going up,” a Chinese nickel sulfate producer source told Fastmarkets.

“We believe that the new energy vehicle market in China is truly recovering and the demand of nickel sulfate is picking up obviously, and we also have plans to expand our capacity further just like the other producers,” he added.

In May, one of the biggest Chinese nickel sulfate producers, Jilin Jien Nickel, announced plans to invest 1.34 billion yuan ($198.7 million) in a new nickel sulfate project in northeastern China that will more than double its nickel sulfate output.

But market participants noted that if the capacity to convert MHP into sulfate cannot increase meaningfully in the short term, then there is a possibility that dissolving briquettes will become a popular route for sulfate production once more.

In June, China imported 96,449 tonnes of nickel intermediates, most of which was MHP, according to Chinese customs data. This marks increases of 83% from the prior month and around 4,446% from the same month of 2021.

Price effectiveness

Prices for MHP have been notably volatile in 2022 as production ramps up and exchanges record large price swings in underlying prices.

During the price peaks on the LME in the aftermath of the suspension of nickel trading on March 8, there were reports that payables on MHP had reached as low as 60%.

Payables have also come under pressure after significant amounts of material entered into the market following better-than-expected production at many of the mines in Indonesia.

“Earlier this year, some producers were destocking into the market to get material off their books such as that Indonesian MHP, pushing payables down. However, it now looks as if this has stopped and the market is sensitive to price increases,” a consumer told Fastmarkets.

“For sure, we can’t rule out the reason that the LME nickel price is weaker than it was in the first half of the year, so the MHP payable has to rebound a bit, but we do see the demand pick up lately in the China’s market,” a trader told Fastmarkets.

“The price tells everything, and both MHP payables and the nickel sulfate price show an uptrend now,” a second Chinese nickel sulfate producer source told Fastmarkets.

Fastmarkets assessed the price of nickel sulfate min 21%, max 22.5%; cobalt 10ppm max, exw China, at 36,000-37,500 yuan per tonne on August 5, up by 1,000-1,500 yuan per tonne from 35,000-36,000 yuan per tonne a week earlier.

Fastmarkets feasibility study

Fastmarkets is currently conducting a feasibility study into the launch of an MHP price on a cost, insurance, freight (CIF) basis for China, Japan and (South) Korea (CJK).

To provide feedback on feasibility and specifications of this price, please contact Callum Perry by email at Please add the subject heading ‘FAO: Callum Perry, re: MHP pricing’

To see all Fastmarkets’ pricing methodology and specification documents click here.

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