D-day looms for nickel market as top shipper checks on mines

MANILA – The global nickel market will discover the severity of the Philippines’ mining audit next Thursday as President Rodrigo Duterte’s government presents the findings of the checkup and announces support for communities affected by any further suspensions. Benchmark prices surged.

The audit in the world’s largest mined nickel supplier has been completed after 16 teams fanned out across the country to assess compliance with environment and welfare rules, according to Leo Jasareno, the official in charge of the examination. The results and community-support program will be presented by Environment Secretary Gina Lopez, Jasareno said in an interview in Manila.

“It’s not about money, it’s about happiness,” said Environment Undersecretary Jasareno, a former head of the mines bureau with almost four decades’ of experience in the industry. The government and Lopez “would not want to see a mine profitably operating but filled with complaints,” he said.

DUTERTE'S WARNING
The crackdown helped to lift nickel to the highest level in a year last month as some mines were suspended, tightening global supplies and fanning speculation that more significant disruption could follow. Cargoes from the Southeast nation are a vital source of nickel for China’s stainless-steel industry, and account for about 20% of global mined output. Duterte, a plainspoken politician who was sworn in June 30, has said his country can do without the mining industry entirely, while Lopez has also been a critic.

“The administration would want only those who really practice responsible mining,” said Jasareno. “It’s a greater emphasis on environmental protection, more than anything else. More than anything, the president would want that the environment would not suffer, that the people would not suffer.”

Nickel rallied as much as 1.3% to $10 035/t on the London Metal Exchange, and traded at $10 025 at 11:36 a.m. in Manila, 14% higher this year. The metal peaked on Aug. 10 at $11 030 before giving up some of its gains as concern about the Philippine audit eased, with Citigroup Inc. saying the checkup has had only a modest effect.

The probe comes after global nickel demand exceeded supply in the first half, with a deficit of 80 800 t compared with a surplus of 45 200 t in all of 2015, according to the World Bureau of Metal Statistics. Stockpiles in LME-tracked warehouses have fallen 16% to 369 096 t this year.

MINE SUSPENSIONS
So far eight nickel operations have been suspended in the audit as well as an earlier examination under the previous administration, according to Jasareno. UBS Group AG estimated these accounted for 10% of the country’s nickel output, or 2% of global supply, according to an Aug. 12 report.

The country shipped 33.1-million t of ore in 2014 and 32.3-million last year, according to official data. Volume next year would depend both on the audit’s outcome and the response of miners to shifting prices, according to Jasareno, who said mines that were suspended may reopen if they fixed shortcomings.

“They will have to retrofit, they have to prove that they can pass the grade,” he said. After a mine is suspended, the department will assess the situation and then make a decision on whether or not it can be lifted, he said.

The government is optimistic that the drive to clean up the industry will act as lure to stimulate investment, rather than a deterrent. The Chamber of Mines of the Philippines has been advising members – at least four of which has been suspended – that they should follow all environmental compliance.

“It’s a different way of attracting investors,” said Jasareno. “You are not attracting investors because of incentives. You are not attracting investors because of permits that can be easily secured. But you are attracting investments because investors are assured that when they put their money on the ground, there’s sustainability.”