By: Ronnel W. Domingo 12:20 AM September 1st, 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.
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.
“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.
“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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