Understanding the MHP Market Pricing Shift: Fastmarkets' Proposal to Discontinue Outright Prices
In a significant market development, Fastmarkets announced on June 20, 2025, a proposal to discontinue several Mixed Hydroxide Precipitate (MHP) outright price assessments. This decision comes after a notable shift in the MHP market towards payable-based pricing mechanisms, rendering traditional outright pricing increasingly obsolete.
"The MHP market has shifted toward payables as the dominant pricing method. As a result, liquidity on an outright basis has dwindled and these price assessments no longer reflect the current market conditions," stated Dylan Duan from Fastmarkets in the official pricing notice.
The transition marks a pivotal moment in battery metals investment, with a formal consultation period running from June 20 to July 18, 2025, followed by implementation on July 23, 2025, subject to market feedback.
Market Alert: The shift from outright to payable pricing represents a fundamental restructuring of how the battery materials supply chain values critical inputs. Market participants should evaluate their contract structures ahead of the July 23 implementation date.
The Evolution of Battery Minerals Pricing
The MHP pricing transition reflects a broader industry-wide movement towards more dynamic pricing mechanisms. Since 2022, the battery materials sector has increasingly embraced payable structures that better accommodate market volatility and align with actual trading practices.
According to Fastmarkets' internal data, approximately 78% of battery raw materials transactions now utilize payable mechanisms, compared to just 42% in 2020. This dramatic shift underscores the market's maturation and sophistication as electric vehicle production scales globally.
What is Mixed Hydroxide Precipitate (MHP) and Why Are Its Pricing Methods Changing?
Mixed Hydroxide Precipitate (MHP) is an intermediate nickel-cobalt product with typically 30-45% nickel content and 1-6% cobalt content. It serves as a critical precursor material in the lithium-ion battery manufacturing chain, particularly for producing nickel sulfate and cobalt sulfate used in cathode production.
The specifications for MHP assessments include strict parameters for impurity levels, with maximum thresholds of:
- ≤4% zinc/copper
- ≤9% manganese
- ≤5% magnesium/sulfur
- ≤0.5% iron
- 35-40% moisture content
The Evolution of MHP in Battery Supply Chains
MHP has gained strategic importance in the battery materials ecosystem over the past decade. As a cost-effective intermediate product, it helps streamline the nickel and cobalt production trends supply chains, particularly from laterite ore operations in Indonesia, New Caledonia, and other nickel-rich regions.
Historically, MHP was priced through outright mechanisms similar to those used for other mineral concentrates. However, as electric vehicle production has accelerated, the need for more flexible pricing aligned with end-market dynamics has driven the shift toward payable structures.
Market Shift from Outright Pricing to Payables
The transition from outright to payable pricing reflects several fundamental market dynamics:
-
Increased market sophistication: As battery supply chains mature, pricing mechanisms evolve to better reflect value extraction at each processing stage.
-
Volatility management: Payable structures distribute price risk more effectively between producers and consumers by linking to underlying metal markets.
-
Trading practices alignment: The majority of physical deals now utilize payable formulas rather than fixed prices.
-
Market liquidity concentration: Trading activity has consolidated around payable mechanisms, draining liquidity from outright markets.
This evolution follows similar patterns seen in other battery materials, notably lithium hydroxide's shift to indexation between 2022-2023, according to Fastmarkets research.
Which MHP Price Assessments Are Being Discontinued?
Fastmarkets has proposed discontinuing three specific MHP price assessments:
CIF China, Japan and South Korea Price Assessments
The MB-NIO-0003 assessment (Nickel MHP outright price, cif China, Japan and South Korea) is a weekly assessment published every Friday between 3-4pm London time. This assessment covers material with:
- 30-45% nickel content
- 1-6% cobalt content
- Moisture content normalized to 35-40%
- Standard commercial lot sizes (100-1,000 tonnes)
This assessment has been a key benchmark for Asian markets but has seen declining liquidity as the region's traders and processors shift toward payable-based pricing.
| Assessment Code | Location | Publication | Quality Parameters |
|---|---|---|---|
| MB-NIO-0003 | CIF China, Japan, S.Korea | Weekly (Friday) | 30-45% Ni, 1-6% Co |
FOB Indonesia Price Assessment
The MB-NIO-0005 assessment (Nickel MHP outright price, FOB Indonesia) is published daily at 4pm London time. This price is derived from the MB-NIO-0003 assessment with freight adjustments to reflect the FOB Indonesia market.
Indonesia's dominance in global MHP supply makes this a particularly significant assessment. The country has rapidly expanded its MHP production capacity since 2020 as part of its downstream nickel processing strategy, transforming from a nickel ore exporter to a processed materials powerhouse.
| Assessment Code | Location | Publication | Derivation |
|---|---|---|---|
| MB-NIO-0005 | FOB Indonesia | Daily (4pm London) | Derived from MB-NIO-0003 with freight adjustments |
Cobalt MHP Price Assessment
The MB-CO-0025 assessment (Cobalt MHP outright price, cif China, Japan and South Korea) is published daily at 4pm London time. When direct market data is unavailable, this assessment is calculated based on the standard grade cobalt metal price.
This assessment primarily serves participants focused on cobalt extraction from MHP and has been particularly relevant for tracking the cobalt component's value separate from nickel.
| Assessment Code | Location | Publication | Calculation Method |
|---|---|---|---|
| MB-CO-0025 | CIF China, Japan, S.Korea | Daily (4pm London) | Based on cobalt metal standard grade when direct data absent |
How Will This Change Impact Market Participants?
The discontinuation of outright MHP price assessments will have far-reaching implications across the battery materials supply chain.
Implications for Producers and Consumers
Contract Restructuring Requirements
Market participants with contracts referencing the discontinued assessments will need to transition to alternative pricing mechanisms. This transition may require:
- Renegotiation of existing long-term agreements
- Development of conversion formulas to translate between outright and payable structures
- Implementation of new risk management strategies
Regional Impact Analysis
The impact will vary significantly by region:
- Indonesian producers: As the world's largest MHP exporters, Indonesian operations will need to adjust FOB pricing structures that previously referenced MB-NIO-0005.
- Chinese processors: The dominant buyers of MHP will likely accelerate their shift to payable structures, potentially gaining pricing advantages during the transition.
- Japanese and Korean refiners: These traditional consumers may face increased price discovery challenges as transparent outright benchmarks disappear.
Strategic Advisory: Companies still using outright pricing in contracts should initiate discussions with counterparties immediately rather than waiting for the July implementation date. Early adopters of payable structures report smoother transitions and reduced legal complications.
Industry Feedback Process
Fastmarkets has established a structured consultation process to gather market feedback:
- Consultation period: June 20 – July 18, 2025
- Implementation date: July 23, 2025 (subject to feedback)
- Feedback submission: Via email to pricing@fastmarkets.com
- Confidentiality provisions: All feedback is treated as confidential unless explicitly permitted otherwise
Market participants are encouraged to provide specific comments on:
- The timing of the proposed discontinuation
- Alternative pricing mechanisms they intend to adopt
- Any unforeseen market impacts requiring consideration
What Are the Alternatives to Outright MHP Pricing?
As outright MHP price assessments are discontinued, market participants must pivot to alternative pricing mechanisms.
Payable-Based Pricing Mechanisms
Payable pricing structures have emerged as the dominant alternative to outright pricing. This approach typically follows a formula:
MHP Value = [Ni content Ă— (LME Ni price Ă— Ni payable %)] + [Co content Ă— (Co reference price Ă— Co payable %)]
The key components include:
- Nickel content percentage: Typically 30-45% in commercial MHP
- Nickel payable percentage: Market-negotiated discount to LME nickel (often 70-85%)
- Cobalt content percentage: Typically 1-6% in commercial MHP
- Cobalt payable percentage: Market-negotiated discount to cobalt metal reference (often 65-80%)
Advantages of Payable Structures:
- Improved risk allocation: Links pricing directly to underlying metal markets
- Enhanced transparency: Clearer value attribution between nickel and cobalt components
- Reduced basis risk: Closer alignment with downstream product pricing
- Broader liquidity: Access to larger LME/metal markets for hedging
| Metal | Typical Content | Reference Price | Typical Payable Range |
|---|---|---|---|
| Nickel | 30-45% | LME Nickel | 70-85% |
| Cobalt | 1-6% | Fastmarkets Standard Grade | 65-80% |
Market Transparency Considerations
While payable structures offer advantages, the transition raises several market transparency concerns:
- Price discovery complexity: Requires monitoring multiple components (metal prices and payable percentages)
- Reporting fragmentation: Different sources for metal prices versus payable percentages
- Regional variations: Significant differences in payable percentages across regions
- Quality adjustments: Less standardized approach to impurity penalties
Industry participants are working to address these challenges through:
- Standardized quality specifications for payable calculations
- Regular publication of payable percentages by price reporting agencies
- Development of consensus methodologies for impurity adjustments
How Does This Change Reflect Broader Battery Materials Market Trends?
The shift in MHP pricing methodology mirrors wider transformations across the battery materials landscape.
Evolution of Battery Raw Materials Pricing
Battery materials pricing has undergone a remarkable evolution as the industry has matured:
- 2018-2020: Predominance of fixed-price contracts and outright pricing
- 2021-2022: Emergence of index-linked pricing for lithium compounds
- 2023-2024: Widespread adoption of payable structures for nickel and cobalt intermediates
- 2025 onwards: Increasing integration with underlying metal markets and sophisticated derivative structures
This evolution reflects the industry's progression from an emerging technology sector to a mainstream commodity market with established pricing practices.
Comparative Pricing Evolution:
| Material | 2020 Dominant Method | 2025 Dominant Method | Key Drivers of Change |
|---|---|---|---|
| MHP | Outright pricing | Payable structure | Battery demand, Indonesia expansion |
| Lithium | Fixed contracts | Index-based | EV growth, producer consolidation |
| Cobalt | Metal-linked | Payable structure | Ethical sourcing, by-product economics |
| Nickel | LME-based | Class-specific indexes | Battery grade premiums, quality differentials |
Supply Chain Implications
The transition to payable-based MHP pricing carries significant implications for the broader battery supply chain:
- Upstream integration: Mining companies increasingly value chemical processing capabilities
- Risk management: Growing demand for financial instruments to hedge battery metal exposure
- Transparency demands: OEMs pushing for clearer price formation throughout the supply chain
- ESG considerations: Payable structures potentially offering better traceability of material origins
Industry Insight: The shift to payables represents more than just a pricing mechanism change—it signals the maturation of the battery materials sector into a sophisticated commodity market with improved risk management capabilities.
Recent government actions regarding critical minerals policy have further accelerated these market transitions, with increasing emphasis on transparency and security in supply chains.
FAQ: Understanding the MHP Price Assessment Discontinuation
Why is Fastmarkets discontinuing outright MHP prices?
Fastmarkets is discontinuing outright MHP price assessments due to fundamental changes in market liquidity and trading practices. According to their official notice, "The MHP market has shifted toward payables as the dominant pricing method. As a result, liquidity on an outright basis has dwindled and these price assessments no longer reflect the current market conditions."
This change aligns with Fastmarkets' commitment to IOSCO Principle 7, which requires benchmarks to reflect actual tradable markets. With diminishing transaction volumes on an outright basis, maintaining these assessments would contradict market realities.
How will this affect existing contracts based on outright prices?
Existing contracts referencing the discontinued assessments will require adjustment. Market participants have several options:
- Renegotiation: Mutual agreement on new reference prices
- Formula conversion: Development of translation mechanisms between outright and payable structures
- Fallback provisions: Activation of contractual clauses for benchmark unavailability
- Term adjustment: Shortening contract periods to mitigate transition risks
Industry precedent suggests that early discussion between counterparties produces the smoothest transitions. The consultation period (ending July 18, 2025) provides an opportunity to finalize these arrangements before implementation.
Will Fastmarkets continue to assess MHP prices in other formats?
While Fastmarkets is discontinuing outright MHP price assessments, they will continue publishing related assessments including:
- Nickel and cobalt payable percentages for MHP
- Underlying metal reference prices (LME nickel, standard grade cobalt)
- Regional premiums and discounts for specific quality parameters
Historical data for the discontinued assessments will remain accessible through the Fastmarkets platform, ensuring continuity for analytical purposes.
What feedback is Fastmarkets seeking from market participants?
Fastmarkets is specifically seeking market feedback on:
- The appropriateness of the proposed discontinuation timeline
- Potential unforeseen consequences requiring mitigation
- Alternative price references market participants intend to adopt
- Specific contract adjustment challenges requiring consideration
All feedback should be directed to pricing@fastmarkets.com with the subject line including "Attention: Dylan Duan / Sybil Pan, Re: Proposal to discontinue MHP outright prices."
The proposal to discontinue MHP outright prices is part of broader industry evolution trends that have transformed how battery materials are valued throughout the supply chain. Additionally, innovations in EV mining transportation are further reshaping operational dynamics across the sector.
Further Exploration: Market participants seeking detailed information about payable-based pricing methodologies can reference Argus Battery Materials methodology documentation, which includes specific calculation examples and quality adjustment factors for battery material assessments.
Disclaimer: This article analyzes proposed market changes that may impact financial contracts and business operations. While every effort has been made to ensure accuracy, companies should consult with specialized advisors before making decisions based on this information. Market conditions may evolve between publication and the final implementation of these changes.
Want to Catch the Next Major Mineral Discovery?
Stay ahead of the market with Discovery Alert's proprietary Discovery IQ model, which instantly notifies investors of significant ASX mineral discoveries, transforming complex data into actionable insights. Explore how historical discoveries have generated substantial returns by visiting the Discovery Alert discoveries page and begin your 30-day free trial today.
