Nickel supply could come under pressure after Philippines President Rodrigo Duterte threatened to ban all open-pit mining next year if companies do not conduct tree-planting projects.
“I want trees as tall as me in six months. If there is none, consider your permit revoked. Do not wait for the day of your sorrow,” Duterte said on Monday (April 9).
The Philippines is the world’s second-largest nickel-producing country, with output reaching 230,000 MT in 2017. The country has also been the top exporter of nickel ore to China over the past four years after Indonesia imposed a ban on shipments in 2014.
“We hope the president will reconsider his position because open pit mining is an established mining method worldwide,” said Ronald Recidoro of the Chamber of Mines, adding that the ban will also disrupt the extraction of cement and coal.
As part of Duterte’s mining crackdown, a total of 26 mines have been shut down or suspended since last year due to environmental damage and alleged violations. A review of the suspensions is still pending and could take longer than initially expected.
In March, the country’s mining council said the first phase of the review will cover legal, technical and environmental concerns and will be finished by June. Meanwhile, the social and economic aspects will take a further three months, doubling the total time estimated originally.
Last year, the Philippines exported 29.1 million MT of nickel ore to China last year, down from 30.6 million MT in 2016, according to Chinese customs data. In total, nickel production in the country declined almost 34 percent.
Looking ahead, BMI Research forecasts that Philippine nickel production growth will average 1 percent year-on-year in 2018.
“The Philippines will maintain a steady average production growth rate of 1.8 percent over 2018-2027 as output gradually recovers from the decline of 2017, maintaining the country’s current position as the second largest nickel producer,” analysts at the firm said.
However, they believe the country’s global market share will decrease from 10.5 percent in 2018 to 9.2 percent in 2027.
On Monday, LME nickel rose 1.2 percent to close at US$13,435 per tonne. Nickel has been on an uptrend since January, and is up almost 7 percent year-to-date.
That said, firms polled by FocusEconomics estimate that the average nickel price for Q2 2018 will be US$12,330. The most bullish forecast for the quarter comes from Euromonitor International, which is calling for a price of US$13818; BMO Capital Markets is the most bearish with a forecast of US$10,472.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.