Nickel industry to tighten supply in 2016

Nickel smelters in China may be forced to shut down or drastically slash their output—resulting in tighter supply for 2016— amid a continued decline in world prices.

Similarly, the scenario of nickel miners in the Philippines stopping operations or significantly shrinking production volumes is seen as likely continuing this year.

Joseph C. Sy, chair of Global Ferronickel Holdings Inc., said in a statement high grade ores will continue to be scarce as this represent only about 15 percent of Philippine nickel exports.

“The price of nickel is also relatively low and there is no practical advantage of buying high grade ore from the Philippines as it is relatively cheaper [for smelters in China] to process medium grade ore,” said Sy.

The Philippines has been supplying nine-tenths of China’s nickel ore imports since the Indonesian government banned exports in January 2014.

Sy said most of the shipments from the Philippines were low-grade ore, but China in 2015 cut down orders for such minerals. He said there was also tightness in the supply of medium-grade nickel ore.

“If LME nickel price will continue to hover below $10,000 per ton, the price of medium-grade ore would likely fall below $20 per wet metric ton (wmt),” he said referring to the benchmark London Metal Exchange rate.

He added that if this did happen, more nickel miners would have to close shop as longer hauling distances for some of them mean operating costs of above $20 per wet metric ton.

According to the Mines and Geosciences Bureau (MGB), the value of nickel ore output for January-September 2015 fell 38 percent year-on-year or P19.4 billion to settle at P32.1 billion. Ronnel W. Domingo