Nickel shortage propels Philippines' mining boom - Mr Defensor
Mr Defensor, chairman of Pax Libera Mining Inc and the nation’s environment secretary from 2004 to 2006, said that “Indonesia’s ban affected us positively.”
He’s preparing four new sites for next year after opening two in the past 2 years. He said that “We will maximize this window and ship as much as we can.”
The Indonesian curbs, designed to promote local processing, started in January and were upheld in court this month. The ban initially drove prices to a 2 year high in May, before larger-than-expected Philippine exports and slowing Chinese growth reversed the rally.
Citigroup Inc said that it’s still bullish on nickel because the country won’t be able to expand supply much more and a global shortage will emerge.
Futures on the London Metal Exchange, the global benchmark for the metal used to make stainless steel, traded at USD 15,653 a tonne on Monday, from this year’s high of USD 21,625 in May. The price is still 13% higher for the year, making nickel the best performing industrial metal on the LME.
Mr Ramon Adviento, a mining analyst at Maybank ATR Kim Eng Securities in Manila, said that “Everyone will try to max out their permit. The low-hanging fruit has already been harvested even before the ban, so there is probability that the Philippines won’t meet the gap left by Indonesia.”
Citigroup analysts wrote in a December 1st report that while ore exports from the Philippines to China rose 24% to 31.2 million tonne in the first 10 months, some of that came from stockpiles. Volumes probably won’t expand much in 2015 even with more mining. Ore from the Philippines typically has less nickel content than from Indonesia, which was the world’s largest mined producer before the ban.
According to Citigroup, which expects prices to average USD 21,625 next year and USD 25,250 in 2016, the global market will swing to a deficit of 62,400 tonne in 2015 from a 25,100 tonne surplus in 2014. Goldman Sachs Group, Inc has a 2015 forecast of USD 17,500, rising to USD 20,000 in 2016 and Morgan Stanley listed nickel this month as its top metals pick for 2015.
The forecasts for supply shortages contrast with gains in global inventories. Those tracked by the LME surged to a record this year, expanding 55% to 406,812 tonne by December 19th.
Economic growth in China, the biggest buyer of ore from Southeast Asia and the largest nickel user, is slowing to the weakest since 1990.
Credit Suisse Group AG analysts said in a December 15th report that the Philippines undermined the bullish outlook for nickel, shipping more ore than expected. They cut their 2015 forecast by 21% to USD 17,625, citing in part the 'mighty influx' of metal into LME-monitored warehouses.
Nickel Asia Corporation, the Philippines’s biggest producer, is among those gaining from the ban. Ore sales rose 38% in the 1st nine months, boosting profit more than fourfold to a record. Shares of the company have tripled this year as the Philippine Stock Exchange Index climbed 21%.
Mr Leo Jasareno, director of the Manila-based Mines & Geosciences Bureau, said that more companies are seeking permits,. The office authorized two more nickel mines this year, including one for TVI Pacific Inc pending for about 15 years.
Mr Jasareno said that “If Indonesia’s ban goes on we’ll see more new mines in 5 years. Nickel will be the darling of mining in the next 10 years.”
Mr Defensor said that each of the 4 new mines may produce about 2 million tonne of ore a year. Its Tawi-Tawi project in the Mindanao region may provide as much as three million tons. It can operate year-round, whereas mines in some other areas have to halt for months during the annual rainy season.
He said that “Ore is in demand and there are many aggressive buyers. We’ll keep the machine efficient, so when the ban ends and prices correct, we can still operate.”
Source - Bloomberg