By Czeriza Valencia (The Philippine Star) | Updated March 22, 2017 - 12:00am
MANILA, Philippines - World nickel prices are not likely to surge as a result of the closure of 23 mines in the country and the cancellation of 75 mining contracts as a large global supply overhang and resumption of Indonesian ore export can fully fill the gap, said UK-based advisory firm Oxford Economics.
In a report, Oxford economist Beatrice Tanjangco said the domestic mining scuffle is viewed worldwide as more of a political issue than economic, and is also seen as a test of the Philippine government’s commitment to uphold responsible mining practices.
“The impact on global nickel prices is also likely to be muted. While the Philippines is currently the world’s top producer of nickel ore, the large global supply overhang and the return of Indonesian ore to the market point towards a low risk of substantial price increases for the commodity,” she said.
“Given a powerful domestic mining lobby, this issue will mainly serve to test the government’s commitment to its stance on responsible mining,” she added.
In February, the Department of Environment and Natural Resources (DENR) ordered the closure of 23 mines due to environmental damage caused by operations. At the same time, 75 mining contracts for mines operating in watershed areas were cancelled.
Tanjangco noted the action will significantly impact affected communities by way of job losses but would have “negligible” impact on the country’s economic output.
As of 2016, the mining industry accounted for less than one percent of the country’s gross domestic product (GDP) with a gross value added of $1.7 billion. Out of the total, nickel mining comprised $0.4 billion.
The closures account for 50 percent of the country’s nickel output and 11 percent of the global nickel ore supply.
“The policy should therefore have a negligible impact on growth. Any impact will likely be felt only on a regional level,” she said.
Despite the lost production from the Philippines, the impact on world nickel prices is expected to be “muted” because of several reasons.