Advertisement

Nickel output growth seen ‘subdued’

Font Size

PHILIPPINE production of nickel is expected to continue “modest growth” in the next few years as a negative policy environment and falling ore grade offsets the effect of mines restarting after a 2017 crackdown on environment law violations, Fitch Solutions Macro Research said in a Sept. 3 industry trend analysis e-mailed to journalists on Wednesday.

“We expect the Philippines to see modest growth in nickel mine production in 2019 due to restarting mines and gains from current operations,” Fitch Solutions said in its note, titled: “Philippine nickel mining outlook showing upside potential.”

At the same time, it clarified: “We maintain our subdued nickel mining growth outlook for the Philippines over the medium to long term, underpinned by the country’s stringent environmental regulations and policy uncertainty that will undermine investment into the Philippine’s thin nickel project pipeline.”

The Philippines — which is the world’s second biggest supplier, next to Indonesia, of the metal that is used to make stainless steel and which is estimated to account for a fifth of global mined nickel supply — saw “declining nickel mine production over the past few years,” with volume falling to 340,000 tons last year from 554,000 tons in 2015, Fitch Solutions noted, citing data from the United States United States Geological Survey.

Fitch Solutions particularly blamed the government’s environmental crackdown on mining operations in 2017.

“Following a round of mine audits in 2018 to determine which operations should be allowed to continue, many of the operations had passed the set standards,” the note read.




“As mines begin to restart over 2019, we believe there is room for an aggregate increase in production when factoring in the increased production at current operations already.”

It cited data from the Department of Environment and Natural Resources’ (DENR) Mines and Geosciences Bureau showing that nickel ore production edged up by 2.5% year-on-year to 2.969 million dry metric tons in the first quarter.

Fitch Solutions noted that major producer Nickel Asia Corp.grew ore sale volume by about 2.1% annually to 9.08 million wet metric tons last semester on output increases at its mines in Cagdianao, Dinagat Islands and Hinatuan, Surigao del Sur that offset declines at its other operations.

At the same time, DMCI Mining Corp.’s Zambales Diversified Metals Corp. is still awaiting DENR’s green light to resume operations “despite the firm stating it has met the necessary requirements to do so,” according to the note.

“Over the coming years, we are maintaining a subdued growth forecast, held down by declining ore-grades and strict environmental regulations that could result in mine closures. Despite some mines receiving clearance to re-open this year, since 2016, a number of mining operations, including nickel, have been ordered to shut down due to environmental concerns, which has kept production growth subdued,” Fitch Solutions said.

The industry looks forward to lifting of a moratorium on new permits that has been in place since 2012, but that will happen only after enactment of a new fiscal regime that will give the government a bigger share in mining revenues. Such a measure had been proposed in the 16th and 17th Congresses but failed to bag approval. It has been reintroduced in the current 18th Congress that began last July.

“We expect the country’s path of increasingly strict policies towards miners to undermine investment potential into projects from new players, thus keeping growth subdued,” Fitch Solutions said, adding that “declining ore-grades at mines will continue to strain growth.”

One development that could spur growth of Philippine nickel production is Indonesia’s plan — announced last Monday — to stop nickel ore exports from January 1, 2020, two years earlier than first intended, as it pushes local producers to process more ore at home.

“We believe nickel smelters in China, which currently import the majority of their ore from Indonesia, will likely look to the Philippines as an alternative source of supply, due to its proximity and substantial nickel mining capacity,” Fitch Solutions said.

“This sudden increase in demand could lead to an acceleration of nickel mine development and increased investment into current operational projects, aimed at increasing production in 2020.” — Vincent M. P. Galang

Advertisement