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French mining company Eramet and German chemical giant BASF have announced they will no longer invest in a nickel-cobalt refining complex in Weda Bay, Indonesia, due to a downturn in nickel prices driven by increased supply from Indonesia.
The project, named Sonic Bay, was first revealed in 2021 and was planned to be situated near Eramet's Weda Bay mine in the North Maluku region. It was set to include a high-pressure acid leach (HPAL) plant, with an anticipated annual capacity of 67,000 tons of nickel metal and 7,000 tons of cobalt metal in mixed hydroxide precipitate (MHP). However, the surge in MHP supply from new China-backed projects has created a substantial supply base for battery-grade products, leading BASF and Eramet to reconsider their investment.
"Since the project's inception, the global nickel market has undergone significant changes," said Anup Kothari, a member of BASF's board of executive directors. "In particular, supply options have evolved, and so has BASF's access to battery-grade nickel. As a result, BASF no longer finds it necessary to make such a large investment to secure a stable metals supply for its battery materials business."
This project would have marked the first major European investment in Indonesia's nickel industry in the 21st century. Currently, there are no other Western projects in the pipeline in Indonesia, and the MHP market is almost entirely controlled by large Chinese nickel companies, with Zhejiang Huayou leading as a major nickel and cobalt producer.
"When BASF and Eramet first announced this project back in 2021, it was intended to be Indonesia's fourth HPAL plant," noted nickel analyst Steven Brown on LinkedIn. "However, during the feasibility study period, several more HPAL plants were developed and commenced operations."
While Eramet and BASF were engaged in lengthy negotiations over Sonic Bay, the Huayou-backed PT Huayue in Central Sulawesi and PT Huafei in North Maluku were announced, commissioned, and have already reached their nameplate capacities of 60,000 tons per year and 120,000 tons per year, respectively.
The rapid ramp-up of Indonesia-based projects has led to a surge in MHP supply, highlighting issues in project planning and waste disposal. The concentration of MHP supply in Indonesia allows new projects to leverage existing infrastructure, raising concerns among market participants about ESG compliance.
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