After the Indonesian Nickel Ore Ban, Will the Philippines Follow Suit?

A second bill calling for a ban on mineral exports were filed in Philippine congress and approved in principle by the house committee on natural resources last week. The bill, filed by Congressman Francisco Matugas, has been combined with an earlier similar bill filed by Congressman Erlpe John Amante and is set to be refined through a technical working group. No legislative decision has been taken as of yet.

According to Matugas’ bill, “The state shall encourage the establishment and development of mining firms and manufacturing plants that will utilize locally processed products and process mineral ores before exporting them to other countries.”

Though not yet approved and implemented, the proposed bill is reminiscent of the nickel ore export ban enacted by the Indonesian government in early 2014. Both the Philippines and Indonesia were named by the US Geological Survey as the world’s biggest producers of nickel in 2013. The unexpected decision of Indonesia to ban mineral exports to top nickel consumer China has paved the way for the Philippines to rise to the top of the pack and increase its nickel export to China by 26 percent.

According to Ramon Adviento from Maybank, the country’s nickel mining companies are benefiting from the Indonesian ore ban. Marcventures, one of the top five nickel miners in the Philippines, expects Chinese exports to reach 3 million wet metric tons this year, up from 2.8 million in 2013. Nickel Asia, the country’s top nickel exporter, expects to increase shipment by 21 percent from 2013.

Needless to say, Philippine nickel miners expressed concern over the looming ban as they are looking to take advantage of the void left by the Indonesia’s ore export ban. Nickel Asia said that domestic ore processing needs to be competitive in order to attract investors. Base metal prices also fell last week as a result of unfavorable news from the Philippines, as well as the pressure over premiums in the US and Europe and the decline in oil prices. All base metals suffered from losses during Friday’s close.

According to Metal Bulletin, “The market needs to see a stronger signal before it can stage a more significant rally and before premiums can rise. This could come this week in the form of tightening Asian raw material supplies.” Prices of Chinese nickel pig iron (NPI) and nickel ore have already been rising, and some NPI producers have already stopped selling in the expectation of a price hike.

In spite of the possible nickel deficit in the short term, nickel ore supply is expected to increase in the long run due to several nickel sulfide projects in various parts of the world. One of them is the Kun-Manie Project in the far east region of Russia. Managed by Amur Minerals Corporation (AIM: BOOM), the Kun-Manie Project is expected to produce an estimated 830,000 tons of nickel, making it one of the top 20 largest nickel sulfide projects in the world.

Amur Minerals could curb China’s nickel demands in the far future, but at the moment, the impending export ban in the Philippines could create a nickel deficit in 2015 and drive the metal’s prices up.