(Repeats with no changes to text. The opinions expressed here
are those of the author, a columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia May 11 It may be going
from bad to worse for the nickel price, with conciliatory
comments from the new mining minister in top ore producer the
Philippines adding to the risks of the market being pushed into
Former army general Roy Cimatu was appointed by Philippine
President Rodrigo Duterte on May 8 to replace Regina Lopez,
whose confrontational approach to mining won her friends among
environmentalists but not among enough politicians, resulting in
her dismissal by the Southeast Asian nation's Congress.
Cimatu was cautious in initial comments to the media, in
stark contrast to the firebrand approach of his predecessor, who
shut down almost half the country's mines, citing environmental
"There are countries where mining contributes a lot to the
economy and environmentalists are not screaming," Cimatu told
Reuters in a phone interview on May 9. "I think it can be done
... (balancing) environment (protection) and responsible
While Cimatu will likely take several weeks to come to grips
with his portfolio, his comments suggest that miners can breathe
While it may be a challenge for some of the closed mines to
re-open, the risks are now that they may be able to do, thereby
boosting output of nickel in the world's largest exporter of the
ore, which, once refined, is mainly used to make stainless steel
and other alloys.
This means it's possible that the Philippines may end up
with more nickel ore available for export, instead of less, as
the market was expecting under the dismissed environment
These additional supplies will be coming to market just as
Indonesia relaxes its ban on exporting unprocessed nickel ore,
which has been in place since the start of 2014.
In some ways Indonesia and the Philippines have been playing
an uncoordinated game of tag in the nickel market.
The Indonesia ban initially raised fears of a shortage of
ore, but the Philippines was largely able to step into the gap
and meet the needs of China, the world's top buyer of nickel
Then last year, mines in the Philippines started being shut,
leading to a drop in Chinese imports, and once again leading to
concerns about supply.
However, Indonesia returned to the game as a major exporter
of semi-processed nickel, once again ensuring China was able to
access sufficient metal for its needs, albeit in different
stages of beneficiation.
OVERSUPPLY OF ORE COMING?
Chinese customs data shows the gyrations in the nickel
market, with imports of ores and concentrates down 11 percent in
the first quarter from the same period last year to 3.03 million
Imports from the Philippines slumped 20 percent to 2.32
million tonnes, accelerating from the 11-percent drop for 2016
as a whole.
Imports of ferronickel leapt by 76 percent in the first
three months of 2017 to 335,367 tonnes, with Indonesia easily he
top supplier at 231,7932 tonnes, a gain of 106 percent.
It's worth noting that Indonesian ferronickel isn't of the
same quality as that supplied by other countries, with a lower
percentage nickel content, making it cheaper and more appealing
to Chinese nickel processors.
The trick is trying to work out how oversupplied the market
for nickel ores and ferronickel may become, assuming the
Philippines doesn't close any more mines and even re-opens some.
If the Philippines managed to match this year the 30.5
million tonnes of ore it sent to China in 2016, it implies that
imports for the April to December period would have to average
around 3.1 million tonnes a month.
That's not beyond the scope of what the Philippines can
produce, but it's most likely an optimistic scenario.
More likely is that the second half sees a modest
acceleration in exports of nickel ore.
It's also highly unlikely that Indonesia will return to
claim its former mantle as the top exporter of nickel ore, with
officials suggesting a figure of 15 million tonnes for 2017, or
about a quarter of what it shipped out in 2013, the year before
the export ban was imposed.
But even so, this level of exports would likely be far in
excess of China's demands, even assuming nickel pig iron
producers were able to ramp up production.
This implies that the price of nickel ore is likely to
struggle, which will in turn effect prices further up the nickel
The spot assessment of Chinese nickel ore with a 1.8 percent
concentration NI-ORBCNC-MB has been losing ground since
peaking around $65 a tonne in December, dropping to $50.50 in
the week ended May 9.
This is still above the $39.50 a tonne that prevailed in
late June last year, just prior to the appointment of Lopez as
Philippine environment minister.
Further up the value chain, London-traded nickel futures
ended at $9,120 a tonne on Wednesday, down 18 percent
from their closing peak so far this year of $11,150 on Feb. 20.
They are still above the $7,595 a tonne post-2008 recession
low it hit in February last year, and their best hope of
avoiding testing that level is for demand to grow.
The International Nickel Study Group is forecasting that
demand will outstrip supply this year, but that may be changed
if both the Philippines and Indonesia ramp up exports of cheap
nickel ore to Chinese smelters.
(Editing by Joseph Radford)