With the nickel market focused on the electric vehicle (EV) battery story this year, changes in nickel ore-producing countries such as Indonesia and the Philippines have lessened their effect on nickel prices.
Their policy changes this year have still swayed the nickel market, though. Metal Bulletin looks back at the key policy changes in these key global nickel ore suppliers in 2017.
In the first half of this year, nickel prices plunged after Regina Lopez – who had ordered closures of mines accounting for half of the country’s nickel production – was dismissed from her role as chief of the Philippines’ Department of Environment and Natural Resources (DENR).
While Lopez’s dismissal removed a major uncertainty for nickel ore supply in the short term, the impact of the policies she had put in place during her 11 months at the helm of the DENR continued to affect the market.
During her tenure, Lopez had ordered the closure of 22 and suspension of five mining operations on alleged environmental violations. She also cancelled 75 mineral agreements with miners and banned future open-pit mining in the country.
Nickel ore production in the Philippines fell 11% year on year to 19.01 million dry metric tonnes (dmt) in January-September in 2017 partly due to suspended operations at a number of nickel mines in the country.
But Lopez’s departure did not mean it was all smooth sailing for Philippine miners.
Lopez’s successor and ex-army general, Roy Cimatu, was expected to take a more moderate position towards mining relative to Lopez, but his public statements during the year have largely been in line with President Rodrigo Duterte’s stance on mining.
In the third quarter of this year, Duterte said he was planning a new mining law, with input from mining stakeholders and Lopez, and considering banning ore exports to encourage domestic processing.
Politicians in the country jumped on the bandwagon and called for the country to ban ore exports, with 22 congressmen filing a bill in late August seeking to halt the export of unprocessed mineral ores and mining in watershed areas.
Late this year, Duterte rejected the recommendation of the Mining Industry Coordinating Council (MICC) to lift the Lopez-initiated ban on new domestic open-pit mining.
A majority of the MICC, which is co-chaired by the Philippines Department of Finance and the DENR, had voted to remove the ban on open-pit mining.
The MICC is still reviewing the 22 mines which Lopez had ordered to shut and/or suspend, with preliminary results due in January 2018. But judging from Duterte’s rejection of the MICC’s recommendation on new domestic open-pit mining, it is now uncertain if Duterte would revoke Lopez’s order even if the MICC endorses a restart for the mines.
The developments in the Philippines’ mining industry over the past year suggest mining policy changes in the country remain unpredictable.
At the beginning of this year, Indonesia announced that it will relax export restrictions on unprocessed ore exports subject to certain conditions, including requiring miners to complete smelter projects within five years.
While there had been rumors of a possible removal of the ore export ban prior to Indonesian government's announcement, the policy change still created shockwaves in the industry as Indonesia’s export ban since 2014 had provided support for nickel prices, particularly in the initial year of the ban.
Indonesia gradually approved export quotas to various companies following the end of the ban. To date, Indonesia has awarded quotas for more than 15 million tonnes of nickel ore exports to nickel miners and smelters. Further quotas are expected to be approved in the near future, bringing the total export volumes close to 20 million tonnes, Metal Bulletin understands.
Impact on prices
Laterite ore prices sank in the first half of the year alongside Lopez’s dismissal and Indonesia’s restart of ore exports. The price of laterite ore with 1.5% nickel content fell to as low as $28 per tonne cif China in June from as high as $49 per tonne in the beginning of the year.
But the developments in the Philippines and Indonesia had less of an impact on London Metal Exchange nickel prices in the second half of the year as focus turned to the optimism over EV battery and stainless steel demand, and the global macroeconomic outlook. This boosted the LME three-month nickel price to as high as $13,030 per tonne in November this year, the highest since June 2015.
The demand-side narrative for nickel proved stronger than that on the supply-side in the second half of 2017. But with the Philippines and Indonesia still the largest producers of nickel ore in the world and biggest suppliers of nickel ore to China, both countries’ mining and ore export policies can still sway the nickel market, as they have proven in the past.
Source: Vivian Teo/Metalbulletin.com
27 December 2017