Nickel

The March 2022 LME Short-Squeeze Crisis and Its Long Aftermath

1. Tsingshan's short position and the squeeze mechanics

The crisis originated with Tsingshan Holding Group (THG), the world's largest nickel and stainless steel producer, which held a large short position — roughly 80% of it in the uncleared, opaque over-the-counter market and largely unreported to LME Clear — built as a hedge against falling prices from its expanding nickel pig iron (NPI) and matte production (Office of Financial Research Brief 25-01). Russia's invasion of Ukraine on 24 February 2022 triggered fears that Russia's Nornickel — supplier of roughly 6–10% of the world's Class 1 nickel — would face sanctions, sending prices sharply higher and forcing Tsingshan and other short holders into an escalating chain of margin calls (LME News — nickel market notices).

2. The trading halt and unprecedented trade cancellation

On the morning of 8 March 2022, nickel prices surged from around $50,000/tonne to briefly touch $101,365/tonne, an intraday move that threatened to push 12 of the LME's 45 clearing members into default, with potential losses exceeding LME Clear's default fund by approximately $400 million (OFR Brief 25-01). The LME halted trading and, controversially, cancelled all trades executed that morning — the FIA estimated roughly $12 billion in cancelled trades, while the OFR brief notes the cancellation eliminated an estimated $1.3 billion of matched profit-and-loss between counterparties (FIA MarketVoice; OFR Brief 25-01). Tsingshan suffered paper losses reported at up to $8 billion before JPMorgan and a group of creditor banks arranged an emergency credit facility and a commodity swap that let the company avoid a disorderly default (LME Nickel market history). Trading resumed on 16 March 2022 under strict daily price-move limits, and the market hit those limits repeatedly — down 5% on the 16th, 8% on the 17th, and 12% on the 18th — as it searched for a new equilibrium (Reuters, timeline of LME nickel crisis).

3. Litigation and regulatory fallout

The decision to cancel already-cleared trades drew immediate legal challenge: Elliott Associates sued the LME for $456 million and Jane Street sued for $15.3 million, arguing the exchange acted unlawfully in retroactively voiding executed trades (Reuters). The UK's Financial Conduct Authority confirmed on 3 March 2023 that it had opened a formal enforcement investigation into LME conduct around the crisis, and the Bank of England appointed an independent monitor to oversee LME Clear's risk management (FCA public statement; Reuters). The UK High Court subsequently upheld the LME's authority to cancel trades under its rulebook's broad "market disorder" powers, a ruling that was still being tested on appeal into 2025 (OFR Brief 25-01; LME Nickel).

4. Reform and recovery: rebuilding a broken market

Post-crisis reforms required members to disclose large OTC nickel positions weekly, and the LME reinstated Asian-hours trading from 20 March 2023 specifically to rebuild liquidity closer to where Chinese and Indonesian participants trade (FIA MarketVoice; Reuters). Recovery has been material: by 2024, LME nickel trading volumes were up 58.8% year-on-year, back near pre-crisis 2021 levels, and combined LME/LME Clear pre-tax profit rose 68% to $193 million, with average daily nickel volumes at their highest since 2015 (Reuters, "LME puts 2022 nickel crisis behind it," 13 Jan 2025). On-warrant LME nickel inventory rebuilt from under 40,000 tonnes in May 2023 to roughly 230,000–287,550 tonnes by late 2024/2026, restoring the deliverable-stock buffer that underpins price-discovery confidence (Reuters; ScarceEarth nickel market data). The exchange has also approved six new deliverable nickel brands since the crisis — five Chinese and one Indonesian — including PT ENICO in December 2025, Impala Nickel briquettes in March 2026, and HUAYOUgx in April 2026, while delisting Sibanye-Stillwater's NICKEL HP brand effective 7 April 2026 (Petromindo, LME approves PT ENICO; Mysteel, Impala Nickel briquettes; Huayou Group, HUAYOUgx LME listing; LME delisting notice, NICKEL HP).

Class 1 vs. Class 2 Nickel: A Market Split in Two by Battery Demand

1. What the LME contract actually requires

The LME nickel contract specifies a minimum purity of 99.80%, conforming to ASTM B39-79 (2023) or Chinese standard GB/T 6516-2010 Ni9990, traded in 6-tonne lots, and deliverable in the form of full plate or cut cathodes, pellets, briquettes, or rounds (LME Nickel contract specifications; LME Special Contract Rules, nickel chemical composition). This high-purity threshold defines "Class 1" nickel — electrolytic nickel, briquettes, cathodes, and powders at ≥99.8% — the only grade the exchange will accept into its warehouse network (USGS 2019 Minerals Yearbook, nickel).

2. Class 2: the stainless-steel workhorse that dominates tonnage

"Class 2" nickel — ferronickel, nickel pig iron (NPI), and nickel oxide sinter, generally below 99% nickel content — is not LME-deliverable but accounts for the majority of physical nickel consumed worldwide, feeding primarily into stainless steel production (USGS 2019 Minerals Yearbook; Zeb Nickel, nickel grades overview). Indonesian and Philippine laterite ore, processed through rotary kiln-electric furnace (RKEF) routes into NPI, has become the dominant global source of this grade over the past decade, a shift that structurally decoupled tonnage growth from the LME-priced Class 1 segment.

3. MHP and the rise of an intermediate battery feedstock

Mixed hydroxide precipitate (MHP), produced by high-pressure acid leach (HPAL) processing of laterite ore, has emerged as a battery-grade-equivalent intermediate that is neither classic Class 1 nor Class 2: it requires a further conversion step into nickel sulphate before it can enter battery cathode supply chains, but delivers a much higher effective nickel content and yield than NPI (npj Materials Sustainability, nickel supply chain review). MHP's rapid scale-up in Indonesia is central to the market's structural shift, discussed in Section 3.

4. Price divergence: two markets, two curves

Macquarie has estimated that Class 1 nickel's share of the global market fell from around 50% in 2012 to roughly 20% in 2022, with an estimated 70% of the world's saleable nickel now pricing at a discount to the LME benchmark rather than at parity with it (Argus Media, "LME nickel grapples with identity crisis," Dec 2022). By May 2026, this had produced a visible two-tier market: LME Class 1 cash nickel traded in the $20,000–23,000/tonne range while NPI and MHP grades traded at a discount amid an estimated 250,000-tonne surplus concentrated specifically in those non-LME grades (Rzzro Intelligence, nickel market analysis, May 2026). LME cash Class 1 nickel hit a 23-month high of $19,450/tonne on 28 April 2026, while the Shanghai Metals Market benchmark for 1# cathode settled at $18,748.23/tonne on 1 June 2026 — a gap that illustrates how Chinese domestic and LME international pricing now move as related but distinct curves (Critical Minerals News, nickel price tracker).

Indonesia's HPAL Revolution: Building the World's Battery-Nickel Supply Chain from Scratch

1. IMIP: the original vertically integrated template

Indonesia Morowali Industrial Park (IMIP), a joint venture between Tsingshan Holding Group (66.25%) and PT Bintang Delapan Group (33.75%), was established in 2015 in direct response to Indonesia's first raw nickel ore export ban, and grew into the world's largest vertically integrated stainless-steel and nickel-processing hub, spanning roughly 5,500 hectares, employing more than 90,000 workers, and hosting over 50 tenant companies (Nickel Industries, Tsingshan collaboration overview).

2. IWIP/Weda Bay: the Halmahera battery-metals complex

Indonesia Weda Bay Industrial Park (IWIP), on Halmahera Island, is a joint venture of Tsingshan (via Perlus Technology, roughly 40%), Huayou Cobalt (roughly 30%), and Zhenshi Group (roughly 30%), representing an estimated $11–13 billion of cumulative investment across more than 5,000 hectares since production began in April 2020 (Reuters, Weda Bay nickel park launch, Apr 2020; Business & Human Rights Resource Centre, IWIP profile). Combined, IMIP and IWIP employ well over 90,000 workers and represent the two anchor sites of Indonesia's transformation into the world's dominant nickel-processing base (South China Morning Post, cost of Indonesia's EV dream).

3. The HPAL build-out: PT Huafei, QMB, and the Merdeka ventures

PT Huafei Nickel Cobalt, a fourth-generation HPAL joint venture among Huayou, Tsingshan, and EVE Energy, cost an estimated $2.3 billion and targets 120,000 tonnes of contained nickel plus 15,000 tonnes of cobalt annually, reportedly running roughly 30% above nameplate capacity (Mysteel, IWIP site visit report). PT QMB New Energy Materials, a GEM Co./Tsingshan consortium plant at IMIP, is one of the largest single HPAL operations in the country. PT Merdeka Battery Materials operates a portfolio of HPAL joint ventures including PT ESG (30,000 tonnes nickel as MHP), PT Meiming (25,000 tonnes), and PT Sulawesi Nickel Cobalt (90,000 tonnes, targeted mid-2026), plus a CATL Brunp joint-venture HPAL plant (60,000 tonnes) at the new Konawe Industrial Park (Merdeka Copper Gold, Merdeka Battery Materials business overview).

4. State bank financing exposure

Indonesian state-owned banks have become deeply financially exposed to this build-out: Bank Mandiri, BNI, BRI, Bangkok Bank, and Permata collectively lent an estimated $2.5 billion to HPAL projects at IMIP, including $1.4 billion to Merdeka Battery Materials/Sulawesi Nickel Cobalt in 2025, $490 million to Merdeka/PT ESG in 2024, and a combined $650 million from BNI and DBS to Nickel Industries/ENC (Yayasan Tanah Merdeka, state bank HPAL financing report, Jan 2026).

Export Controls, Quota Politics, and the Retreat of Western Nickel Mining

1. Indonesia's export ban timeline and the RKAB quota system

Indonesia first banned unprocessed nickel ore exports in January 2014 to force domestic smelting investment, briefly relaxed the rule, then reinstated a full ban on raw ore exports effective 1 January 2020, two years earlier than originally scheduled. The government has signalled its intent to extend downstream-processing requirements to nickel concentrates by around 2028, while managing annual mining volumes through the RKAB (Rencana Kerja dan Anggaran Biaya) quota approval system, which sets company-level extraction ceilings and has been a recurring source of supply uncertainty and permitting delay heading into 2026.

2. DHE-SDA export proceeds repatriation rules

Indonesia's DHE-SDA regulation (Devisa Hasil Ekspor Sumber Daya Alam) requires exporters of natural resource commodities, including nickel products, to repatriate and, for a specified holding period, retain a portion of export proceeds in domestic banking system accounts — a capital-control mechanism layered on top of the physical export licensing regime that adds compliance complexity for foreign offtakers and joint-venture partners operating in the nickel processing parks.

3. BHP Nickel West suspension and Ravensthorpe closure

BHP announced in July 2024 that it would suspend operations across its Nickel West division in Western Australia — including the Kwinana refinery, Kalgoorlie smelter, and Mount Keith and Leinster mining operations — with the suspension taking effect from October 2024, directly citing the collapse in nickel prices driven by low-cost Indonesian supply growth. First Quantum Minerals separately placed its Ravensthorpe nickel operation into care and maintenance for the same reason, and Andrew Forrest's Wyloo Metals suspended its Kambalda nickel concentrator, together marking the effective retreat of a significant share of Australia's nickel mining industry from active production.

4. Structural implications for Western supply diversification

Why it matters: the simultaneous suspension of BHP Nickel West, Ravensthorpe, and Kambalda removed a material share of non-Indonesian, non-Chinese-owned nickel supply from the market in the same period that Western governments and automakers were seeking to diversify battery nickel sourcing away from Indonesia's Chinese-dominated processing base — leaving critical minerals strategies with fewer near-term alternative supply options outside Indonesia and Russia.

Nornickel: Sanctioned in Practice Without Being Formally Banned

1. The 13 April 2024 LME/CME warehouse restriction

Following joint action by the U.S. and UK governments, the LME and CME announced they would no longer accept newly produced Russian nickel, aluminium, or copper into their warehouse networks from 13 April 2024 onward, while metal produced before that date remained tradeable and deliverable. This created a bifurcated market: pre-13-April Russian metal continued circulating freely through LME-registered warehouses, while post-date production had to find buyers in markets outside the LME/CME system, primarily in China and other non-sanctioning jurisdictions.

2. Why Nornickel avoided direct sanctions

Nornickel supplies a globally significant share of the world's Class 1 nickel, palladium, and platinum, and Western governments have historically been reluctant to sanction the company directly given the risk of triggering a supply shock in battery and automotive catalyst markets already strained by the 2022 LME crisis. The metal-origin warehouse restriction represented a middle path: it discouraged fresh Russian production from entering Western exchange infrastructure without cutting off the company's ability to sell existing inventory or contract directly with non-Western buyers.

3. Market effects: a two-track Russian metal price

The restriction effectively created a discount market for post-April-2024 Russian nickel sold outside LME/CME channels, while pre-restriction inventory retained full LME-deliverable value. Chinese buyers, already the dominant counterparty for Russian metals following the 2022 sanctions on other commodities, absorbed much of the redirected volume, reinforcing China's position as the central clearinghouse for metal that Western exchanges will not warehouse.

EV Battery Demand: The LFP Threat to Nickel's Growth Story

1. NCM811 and NCA: nickel's high-energy-density case

High-nickel cathode chemistries — NCM811 (80% nickel, 10% cobalt, 10% manganese) and NCA (nickel-cobalt-aluminium, used prominently by Panasonic for Tesla) — deliver higher energy density per kilogram than LFP, translating into longer vehicle range for a given battery pack weight. This made high-nickel chemistries the preferred choice for premium and long-range EV models from automakers including Tesla (via Panasonic and LG Energy Solution cells) and various premium German and Korean OEM platforms.

2. LFP's cost and safety advantages driving share gains

LFP batteries contain no nickel or cobalt, offer materially lower cost per kilowatt-hour, longer cycle life, and better thermal stability than nickel-rich chemistries, though at lower energy density. CATL, the world's largest battery maker, and BYD, which is both an automaker and battery producer, have driven LFP's share of global EV battery deployment sharply higher through the 2020s, with LFP now dominant in China's mass-market EV segment and increasingly adopted by Tesla for standard-range Model 3 and Model Y variants and by other global automakers seeking lower-cost entry-level EV platforms.

3. Sourcing strategy divergence among the top cell makers

CATL, LG Energy Solution, and Panasonic have each pursued different chemistry mixes: CATL leads in LFP volume while maintaining NCM lines for premium customers; LG Energy Solution has historically skewed toward NCM/NCA chemistries for North American and European automaker partners including GM and Hyundai; Panasonic remains most closely tied to NCA for its long-standing Tesla supply relationship. This divergence means nickel demand growth is increasingly concentrated in a narrower set of premium and long-range vehicle platforms rather than the broad EV market as a whole.

4. Net effect on the nickel demand outlook

Why it matters: the LFP share shift is the single largest structural headwind to the "EV supercycle" nickel demand narrative that underpinned much of the 2021–2022 price boom. Nickel's battery demand growth has not disappeared, but it is now a function of premium and long-range vehicle mix rather than total EV unit sales, making forecasting materially more sensitive to automaker chemistry-mix decisions than to headline EV adoption rates.

ESG Scrutiny: The Environmental Cost of Indonesia's Nickel Boom

1. The March 2026 IMIP landslide and production halt

In March 2026, a landslide at a waste-disposal site within the Indonesia Morowali Industrial Park killed at least one worker and prompted reports that four smelters — PT QMB New Energy Materials, Green Eco Nickel, Meiming New Energy, and ESG New Energy — had halted production, though IMIP management publicly denied that all four plants had stopped, stating some of the named facilities were still under construction rather than operating (Bisnis Indonesia, IMIP landslide reporting, Mar 2026; Petromindo, IMIP denial statement). Indonesia's Ministry of Environment opened a review of PT QMB's environmental permit following the incident (Bisnis Indonesia). The landslide followed a separate 2023 IMIP smelter explosion that killed at least 21 workers, adding to a pattern of serious safety incidents at the park (Bisnis Indonesia).

2. Coal-powered captive smelting and emissions intensity

Most of Indonesia's nickel processing parks, including IMIP and IWIP, rely on dedicated "captive" coal-fired power plants built specifically to supply the smelters rather than drawing from a decarbonizing national grid, giving Indonesian NPI and HPAL nickel a materially higher carbon footprint per tonne than nickel refined using renewable or lower-carbon grid power — a growing concern for automakers and battery makers facing EU Battery Regulation carbon-footprint disclosure requirements.

3. Deep-sea tailings disposal (DSTP)

Several Indonesian nickel operations, including Harita Group's Obi Island operations, use deep-sea tailings placement to dispose of HPAL processing waste, discharging tailings through pipelines into ocean waters at depth rather than using land-based tailings storage facilities — a practice banned or heavily restricted in most Western mining jurisdictions due to concerns about marine ecosystem damage, heavy-metal dispersion, and the difficulty of monitoring or remediating deep-ocean waste once discharged (South China Morning Post, cost of Indonesia's EV dream).

4. Halmahera deforestation and land-rights concerns

Nickel mining and smelter-park expansion on Halmahera Island, the location of IWIP/Weda Bay, has been linked to significant deforestation and land-grabbing affecting indigenous and local communities, including the Indigenous Hongana Manyawa people who maintain traditional forest-based livelihoods in the concession areas (Business & Human Rights Resource Centre, IWIP profile; South China Morning Post). Reporting has documented pollution complaints from surrounding communities and disputes over customary land rights as industrial park boundaries expanded to accommodate new HPAL and RKEF capacity.

Recycling and Secondary Supply: Black Mass, Battery Recyclers, and the Post-Li-Cycle Landscape

1. Black mass as the intermediate recycling product

End-of-life lithium-ion batteries are typically first shredded and processed into "black mass," an intermediate powder containing recoverable nickel, cobalt, lithium, and manganese, which is then sent to hydrometallurgical or pyrometallurgical refiners for final metal recovery. Global black mass trade has grown substantially as EV battery volumes reaching end-of-life increase, but the refining step — converting black mass back into battery-grade nickel sulphate — remains concentrated among a small number of specialized processors.

2. Li-Cycle's collapse and Glencore's acquisition

Li-Cycle, once positioned as North America's leading lithium-ion battery recycler with a network of "Spoke" shredding facilities feeding a planned central "Hub" refinery in Rochester, New York, encountered severe cost overruns and financing difficulties at the Hub project, ultimately filing for insolvency protection. Glencore, which had been a strategic investor and offtake partner, moved to acquire key Li-Cycle assets, consolidating control over one of the few scaled Western black-mass processing platforms rather than allowing the recycling capacity to disappear entirely from the market.

3. Redwood Materials and the vertically integrated alternative

Redwood Materials, founded by former Tesla executive JB Straubel, has pursued a more vertically integrated approach, combining battery collection, black-mass processing, and cathode-material production at its Nevada facility, with partnerships spanning Panasonic, Ford, and Toyota. Redwood's strategy of producing battery-grade nickel and cobalt sulphate directly for re-sale into new cathode production, rather than selling black mass onward to third-party refiners, reflects the industry's broader recognition that capturing margin at the refining step is essential to making battery recycling economically viable.

4. USGS recycling-rate context

USGS Mineral Commodity Summaries data situates secondary (recycled) nickel as a meaningful but still minority contributor to total U.S. and global apparent nickel supply, with stainless-steel scrap remaining the single largest recycling stream by volume — substantially larger than battery-derived black mass recycling, which remains an early-stage, rapidly scaling but still small contributor to overall secondary nickel supply as of the mid-2020s (USGS Mineral Commodity Summaries 2026, nickel chapter).

Financialisation: The LME's Fight to Remain the Reference Price

1. LME liquidity recovery, but a changed participant base

As detailed in Section 1, LME nickel volumes rose 58.8% in 2024 and on-warrant inventory rebuilt substantially from its 2023 lows (Reuters, 13 Jan 2025). However, much of that recovered liquidity and warehouse stock is increasingly composed of newly approved Chinese and Indonesian brands rather than the historically dominant Western and Russian production base, changing the underlying supply composition behind the benchmark even as trading activity itself has normalized.

2. SHFE's internationalization push

The Shanghai Futures Exchange has continued expanding access for international participants to its own nickel futures contract, reflecting China's ambition to establish a China-based reference price that better reflects the country's dominant position in Class 2/NPI and HPAL-derived nickel supply, rather than relying on a London benchmark built around a shrinking Class 1 segment. This internationalization effort accelerated through 2025 and into 2026 as Chinese and Indonesian output continued to represent an ever-larger share of global nickel units.

3. SMM and Fastmarkets as de facto Class 2/MHP benchmarks

In the absence of a mature exchange-traded contract for NPI or MHP, price reporting agencies including Shanghai Metals Market (SMM) and Fastmarkets have become the de facto reference points for these grades, publishing regular assessments that increasingly diverge from LME Class 1 pricing, as illustrated by the gap between LME cash nickel ($19,450/tonne, 28 April 2026) and SMM's 1# cathode assessment ($18,748.23/tonne, 1 June 2026) (Critical Minerals News, nickel price tracker).

4. INSG's role as neutral market-balance arbiter

The International Nickel Study Group (INSG) continues to publish the most widely cited independent assessment of global primary nickel supply, demand, and the resulting market balance, providing a common reference point that both LME- and SHFE-oriented market participants rely on even as the exchanges themselves diverge in participant base and contract design.

Indonesia's dominance of global nickel mine production is now overwhelming, and USGS Mineral Commodity Summaries 2026 data shows the country's share continuing to grow even as INSG projects a sharp swing in the global market balance for 2026.

1. Global reserves by country (USGS MCS 2026)

Source: USGS Mineral Commodity Summaries 2026, nickel chapter. Indonesia holds the largest identified global nickel reserve base, a position that has directly enabled its rise to dominance in mine production over the past decade.

2. Mine production concentration

Indonesia accounts for the largest share of global mined nickel production by a wide margin, with the Philippines, Russia, New Caledonia, and Australia making up most of the remainder. This concentration has intensified since Indonesia's export bans forced ore processing onshore, drawing in the Chinese-financed RKEF and HPAL capacity detailed in Section 3 (USGS MCS 2026).

3. The 2025–2026 swing from surplus to deficit

4. U.S. import reliance and price context

The United States remains substantially import-reliant for primary nickel, sourcing material from Canada, Indonesia (indirectly via processed products), and other suppliers, with USGS tracking recycling's contribution to total apparent U.S. nickel supply as a meaningful but secondary component alongside primary imports (USGS MCS 2026). Combined with the Class 1/Class 2 price divergence in Section 2 and the LME-vs-SHFE benchmark fragmentation in Section 9, the overall picture is a market whose headline LME price increasingly understates the tightness building in the specific grades and geographies that matter most for battery and defense-relevant supply chains.

Because Indonesia controls roughly half of world nickel mine output, the way Jakarta prices its own ore is now a de facto reference for the entire industry. Every tonne of Indonesian nickel ore, MHP, MSP, NPI, ferronickel, matte or refined ingot that changes hands domestically must be valued at or above the state's HPM (Harga Patokan Mineral) floor for royalty, iuran produksi and export-levy purposes. Since 15 April 2026 the governing decree is KEPMEN ESDM 144.K/MB.01/MEM.B/2026, which replaces the previous 268/2025 regime and materially expands what counts as monetisable value in a laterite orebody.

1. The 2026 nickel-ore HPM formula

2. What actually changed vs KEPMEN 268/2025

• The base nickel-ore corrective factor rises from 17% to 30% at 1.6% Ni — roughly doubling headline royalty on saprolite ore before any associated-mineral adjustment.
• Fe, Co and Cr in laterite ore are now monetised inside the same HPM formula; under 268/2025 they were ignored, effectively subsidising integrated smelters.
• The unit of measurement switches from USD/DMT to USD/WMT and the explicit (1 − MC) moisture multiplier makes the wet-to-dry translation transparent for the first time.
• Bauxite ore adds an R-SiO₂ deduction (−1 USD/DMT per +0.5% above the 2% reactive-silica cap, capped at −3.5 USD/DMT).

3. Downstream product HPMs

Full formulas are in Lampiran I of KEPMEN ESDM 144.K/MB.01/MEM.B/2026 (JDIH ESDM).

4. Where the HMA inputs come from

The HMA (Harga Mineral Acuan) that feeds the HPM formula is republished by Kementerian ESDM twice a month at minerba.esdm.go.id/harga_acuan (Periode Pertama and Periode Kedua, effective since 26 February 2025 — it was monthly before). Twelve metals are covered: nickel, cobalt, lead, zinc, aluminium, copper, gold, silver, manganese, iron ore (laterite/hematite/magnetite), chromium ore and titanium concentrate.

5. Why it matters for global nickel pricing

For the largest producer in the world, HPM is where royalty economics meets export policy. Every 10 USD/t change in HMA_Ni flows straight into ore, MHP, NPI and matte HPMs, changing the state's take on every downstream product line simultaneously. Fastmarkets has explicitly clarified that its Indonesian nickel-ore assessments now include HPM alongside spot market data — making the government-set formula a real benchmark input, not just a fiscal instrument. Physical trades typically clear at HPM plus a market premium; HPM sets the floor for state revenue, not the ceiling for trade.