Global Nickel Market Convulsed as Top Shipper Sees Mine Failings

  • Philippines says 11 mines pass, further 20 facing suspension
  • Nickel erases loss after government presents audit’s findings

The Philippines said three-quarters of its mines fell short in an audit of the top nickel producer, with 20 mines facing suspension unless they can respond to shortcomings within days, on top of the 10 already halted. Nickel went on a switchback ride, flipping from losses to a six-week high.

The mines already shut, together with those now recommended for suspension, accounted for 56 percent of nickel production by value last year, Environment Undersecretary Leo Jasareno told reporters in Manila on Tuesday. He presented the findings of the checkup at a briefing with Environment Secretary Gina Lopez, saying only 11 mines had passed. The country has 41 metallic mines, mostly nickel, together with suppliers of copper and gold, according to a revised presentation by the government.

Mines recommended for suspension will be allowed to operate as normal until a final decision in about two weeks, according to Jasareno. Lopez plans to meet on Thursday with miners that haven’t passed the test, before making a final decision on their status, as well meeting with those that did.

Global Market

Nickel, the best-performing metal on the Bloomberg Commodity Index this quarter, reversed losses as the results of the audit were announced and traders and investors started to factor in the potential for more Philippine mine suspensions in a global market already set for a global deficit. The Asian country accounts for about a quarter of mined nickel supply, with most cargoes feeding China’s stainless-steel industry. The probe was ordered by new President Rodrigo Duterte and Lopez in July to check on compliance.

“They have to get their act together,” Lopez said, referring to the mines that now face suspension. “We cannot allow any mining company to operate and make millions while the people is suffering. That’s against the law.” 

Nickel surged as much as 2 percent to $10,745 a metric ton on the London Metal Exchange, the highest since Aug. 12, and traded at $10,675 at 10:50 a.m. in London, recovering from a 2.7 percent loss. Last month, prices surged to $11,030 a ton as the audit got under way, the highest in a year.

“The impact, or the potential impact, warrants a premium,” said Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd. While the audit was light on details on the standards on which miners were judged, it would be a bit lax to assume all is going to be OK over the medium or longer term, Hynes said by phone.

Share Movers

In Manila, companies with operations recommended for suspension dropped, while producers outside the country gained. Marcventures Holdings Inc., whose nickel mine in Surigao del Sur province is set for suspension, sank 17 percent. In Hong Kong, Glencore Plc gained as much as 2.4 percent, while Australia’s Independence Group NL added 5.6 percent in Sydney.

Citigroup Inc. had played down the likely impact of the audit in a quarterly commodities report received on Monday even as the bank forecast global nickel deficits through at least 2020. The larger nickel miners probably won’t affected by the closures and may even increase output, according to the bank.

The Philippines’ principal mining group issued a statement saying the whole audit was done in a punitive manner rather than objectively and there should have been an earlier dialogue to resolve the differences rather than a sudden change in the rules of the game. Still, the Chamber of Mines of the Philippines was optimistic the alleged violations would be addressed properly and in a timely manner, according to Ronald Recidoro, the vice president for policy.

The country produced 467,000 tons of nickel last year, 24 percent of the global mined total of 1.93 million tons, according to a quarterly report from Morgan Stanley. There was a cumulative global deficit 42,500 tons in the first seven months of the year, the International Nickel Study Group said in September.

“I want to make it clear, I have no beef against the mining industry but I am against the adverse effects happening in some of the situations,” Lopez said. “I want to be better than Canada, better than Australia.”

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