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PH mining stance to disrupt global nickel market

/ 12:20 AM September 01, 2016

The government’s moves against irresponsible mining is likely to disrupt the global nickel market, mainly by forcing the movement of stocks in warehouses and benefit suppliers in other parts of the world.

London-based investor service firm FastMarkets Ltd. said the Duterte administration “could structurally change [the] nickel market,” at least in the movement of stocks if not in helping raise prices.

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William Adams, head of research at FastMarkets, said in a forecast and analysis report for the third quarter of 2016 that while nickel prices could be very volatile, available stocks were ample enough to dampen any supply shock.

“The new government in the Philippines brings with it a new environment minister, Regina Lopez, a known environmentalist who seems to be on a mission to rein in mining, especially open-pit mining,” Adams said.

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“Having come to power on June 30, the government has been quick to act, suspending two nickel mines and has launched an audit of all mining,” he added. “Manila has warned it would cancel mining projects that were causing environmental harm.”

Adams noted that any dramatic shift in the Philippines’ attitude toward mining could have a significant effect considering that the country was the largest exporter of nickel ores, accounting for 23 percent of global supply.

Other significant suppliers are mines operating in Australia, Indonesia and Russia.

Even so, Adams said the Philippine economy itself might not suffer much damage from a harsh stance against mining since the industry contributed just about one percent of gross domestic product.

Government and industry data put the figure at 0.7 percent of GDP, although University of the Philippines economist Ramon Clarete said that with the country’s mineral reserves, mining had the potential to contribute 10 percent of the economy.

“If it were not for the potential supply disruption from the Philippines, then, it would be difficult to be bullish on nickel other than to say that, with prices below the marginal cost of production, a supply response would be seen eventually,” Adams said.

He said such a response might now be likely as a possible cut in Philippine output would be big enough to warrant a faster-than-expected drawdown of stocks in exchange warehouses.

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“The Philippines produced an estimated 470,000 tons of nickel in 2015, which is equivalent to around 24 percent of global consumption of nickel units,” Adams said.

“So while stocks are high, a meaningful restructuring of the Philippine mining sector that hits production could turn the outlook from subdued to bullish in double-quick time,” he added.

FastMarkets expect prices of refined nickel—which is used mainly in the production of stainless steel—to be within the range of $9,000 and $11,400 per ton in the third quarter.

The company said that, over the past four years, prices had gone down steadily from $17,535 per ton in 2012 to an estimated $11,858 in 2015.

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