News Analysis Trade

Nickel’s rebound amid industry shake-up

New mining policies being explored by the Philippines’ Department of the Environment and Natural Resources (DENR) could spur the future of the nickel industry worldwide. Right now, sensing a fall off in production of the metal-ore in the Philippines, nickel prices have risen to their highest level in nine months, trading at US$10,425 a ton. In February, a ton of nickel on the London Metal Exchange cost US$7,550. One analyst has predicted that the metal will command US$12,000 a ton within six months.

The Philippines is the world’s largest nickel producer. In 2015 it mined 465,000 tons, accounting for 22% of global output. It is also China’s major source of nickel ore, the Mainland’s biggest ore import.

The expected new policies – and given the commitment at the top of government, there’s little doubt that they will go though – involve a radical re-regulating of the mining sector. The DENR, headed by secretary, Regina Lopez, is determined to impose an environment-first policy which would virtually see the end of open-pit mining – the country’s most common method for nickel-ore extraction.

Lopez has ordered a comprehensive review of the mining sector and her department is already cracking down on errant mining practices. Three mines have been issued with suspension orders in the past two weeks – among them, the Berong Nickel Corporation (BNC) open-pit operation in Palawan. This is a large mine, a partnership between BNC and Philippine-listed Atlas Consolidated and Mining Corporation; last year it produced 868,000 tons or nickel ore.

The review was started 8 July and is set to take one month to complete, but the indications are that Lopez, an unapologetic environmentalist, is far from happy with what she has seen so far and has stated that even mines with certification from the International Organisation of Standardisation (ISO) will be subject to any new Philippine regulations.

She will also have the support of her president, Rodrigo Duterte, who has intimated that the rules may need to be rewritten to limit environmental degradation caused by the sector.

The Palawan suspension order was issued after a spill from the mine had been found to have affected coral in the area. Palawan is one of the country’s main tourist destinations. Its coral reefs with their large populations of tropical fish and many varieties of sponges are recognised worldwide as a prime ecological system. Two other nickel miners, ISO-certified Benguetcorp Nickel Mines and Zambales Diversified Metals, had their operations suspended in Zambales province one week earlier on environmental grounds.

While the review proceeds and the uncertainty surrounding the future of Philippine nickel hangs in the balance, Goldman Sachs has estimated that up to 25% of the country’s ore output could be sucked from the market before the end of the year.

The Philippines clinched the China market in 2014 after the Indonesian Government placed an export ban on unprocessed raw materials in an effort to pressure its miners to produce value-added products instead of ore. So far, this policy has failed to deliver and may yet be rethought.

Now, just as the Philippines was able to improve its position in the contracting Chinese ore market with the help of Indonesia’s self disqualification, cashing in on Indonesia’s realignment of its mining sector, nickel-ore producers around the world are positioning themselves to take advantage of a drop in output from the Philippines which is almost guaranteed by the anticipated restructuring.

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