Philippine nickel miners confident production won’t drop

By @chelean on
A worker processes nickel at a nickel smelter of PT Vale Tbk, near Sorowako, Indonesia's Sulawesi island, January 8, 2014.
A worker processes nickel at a nickel smelter of PT Vale Tbk, near Sorowako, Indonesia's Sulawesi island, January 8, 2014. Indonesia's ban on exports of key mineral ores - unless they are processed in the country - risks backfiring as weaker commodity prices mean it is not cost-effective to invest in expensive smelters and refineries. Picture taken January 8, 2014. REUTERS/Yusuf Ahmad

While the agricultural sector in the Philippines dread the looming El Niño phenomenon that could introduce widespread dryness across the country, the mining segment see it as a “blessing.”

“The impact of El Niño on our operations is going to be positive. The dry weather means our mines can continue to be productive in October or November when the season of heavy rains usually starts.” Nickel Asia Corporation CFO Emmanuel L. Samson told Business World.

During wet season, metal producers are forced to suspend field operations for safety and technical reasons, as it would be difficult to get ore underground when the earth is wet and damp. Typically, the rainy season stretches from October to the second quarter of the following year, a long period when most mining operations are recording average productivity levels.

Nickel Asia, which is also partly owned by Japan’s Sumitomo Metal Mining, has projected an ore export volume of more than 19 million wet metric tonnes (WMT) for 2015. The company produced only 17.9 million WMT last year.

In 2014, Philippine producers became the top suppliers of high-grade ore in the world when Indonesia decided to prohibit their local ore from reaching foreign markets. Since then, giant consumers such as China and Japan have been getting their ore supplies from the country, a scenario that sent the local mining industry into a prolonged boom.

In the past months, however, top nickel producers in the country admitted that they might fail in satisfying all of China and Japan’s demands due to the falling supplies outside Asia.

“NPI producers would be completely reliant on Philippine ore after stockpiles of Indonesia[n] ore run out. Chinese stainless steel producers will now have to source nickel elsewhere,” Samson told Bloomberg last April.

This was also the time when then-explorer Amur Minerals Corporation ( London AIM :AMC) was intensely considered by investors as one of the companies that could save the ailing supply segment.

The Russia-based company, which gained pre-production license approval in May this year, has a projected production volume of 90 million tonnes of nickel ore. This number is considered “promising” by mining experts, and its flagship project in the Kun-Manie Reserve is among the largest base metal facilities in the world today. Amur will become one of the few giant nickel producers outside the Asia-Pacific region the moment it begins supplying ore to multinational steel companies.

Despite the admission, however, supply is the least of Philippine producers’ concerns. The main concern now is the price slump, which is buoyed by a weakening demand from steel producers in China. The market rout in July has impaled its economy, forcing industries to reduce commodity export volume.

For now, the country is just waiting for the Chinese demand to pick up. Since the crash, several shipments to China were cancelled, forcing producers to either sell their products to other countries or store them to their warehouses temporarily. Philippines accounted for almost all of China’s nickel ores and concentrate imports in the first half of this year. 

A Maybank analyst revealed China’s nickel imports in the first two quarters of 2015 were lower than expected, but its NPI producers will likely increase their purchase in the months to come. 

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