The Mining Crisis in World's Top Nickel Shipper: QuickTake Q&ABloomberg News
The Philippines is a trove of mineral resources, with deposits of nickel, copper and gold. As prices rise and the economy in China -- customer No. 1 -- hums along, these should be good times for Philippine miners. Instead of relishing the opportunities, the industry’s in crisis. Environment Secretary Gina Lopez wants to shut more than half of the country’s mines, and producers are fighting back, hard. The showdown has implications beyond the Philippines, with the potential to hit global supplies.
1. Why the move to shut down mines?
Lopez isn’t your run-of-the-mill official. Appointed by President Rodrigo Duterte last year, the environmentalist-turned-regulator immediately launched a nationwide checkup of the mines. For Lopez, many operations are simply incompatible with the Asian nation’s fragile ecology, and she often alleges that the companies don’t do enough to alleviate poverty in local communities. Of special concern is protecting water resources, or as she’s put it with trademark zest: “You kill water, you kill life. It’s not good for economic growth.”
2. How important are the mines?
The Philippines is the top miner of nickel ore, a metal that’s used to make stainless steel, and many producers now under threat are key suppliers to China. In February, Lopez ordered that of the nation’s 41 metal mines, 23 should be shut and another five suspended. She followed that with an order to claw back permits for 75 areas yet to be mined. The chamber of mines says if she gets her way, the nickel industry will be all but wiped out. It’s also warned that more than 1.2 million jobs, at the mines and in related areas, are at stake, along with billions of dollars in investments.
3. Does this matter beyond the Philippines?
Yes. The country accounts for 20 to 25 percent of worldwide mined nickel supply, so a dent in exports will crimp global production at a time of rising stainless-steel demand, potentially helping to pave the way for deficits. That could provide a further lift to benchmark prices in London that climbed in 2016 and have extended gains this year. The advance has aided mining giants such as Brazil’s Vale SA and Russia’s MMC Norilsk Nickel PJSC, the biggest suppliers. And any pain in the Philippines may be someone else’s gain, with rival shippers in the region -- notably in Indonesia -- in a position to capitalize.
4. How are miners fighting back?
If you are mining lawyer in the Philippines right now, you’re in demand. Miners are resisting the closure and suspension orders and the removal of agreements that govern the yet-to-be-mined areas. The appeals typically say that Lopez’s findings of alleged abuses lack substance, or that she hasn’t followed due process, or both. The first stop is the Office of the President, where they’ll be reviewed by Duterte’s team. If miners aren’t satisfied there, they can take their case to the courts. Most mining sites remain in operation while the paperwork stacks up.
5. Who’s going to win?
That’s not clear, and the back and forth will stretch well into 2017, if not beyond. The Department of Finance has emphasized the economic downside of mine shutdowns, and Finance Secretary Carlos Dominguez says contracts must be honored, pushing back against Lopez’s agenda. The two departments head up a joint mines council that’s on a three-month review of the initial audit and Lopez’s orders to assess the findings. Whatever happens, Duterte will be the key player. So far, he’s offered general support for Lopez’s moves.
6. So Lopez is on solid ground?
Maybe. Though she was picked by Duterte, her appointment at the Environment Department has yet to be confirmed by Congress. After several delays, the Commission on Appointments, which vets cabinet selections, still hasn’t settled on whether it’ll endorse Lopez. Predictably, the miners’ chamber is leading a campaign to have her rejected. Lopez herself has questioned how long she’ll be able to last.
The Reference Shelf
- Tirades aside, what Duterte has gotten done so far.
- “We’re not questioning her niceness,” a mine boss says of Lopez.
- UBS foresaw a nickel supply shock this year.
- The Mines and Geosciences Bureau is the first stop for an overview of what the country mines and where.
- A valuable if dated snapshot from the U.S. Geological Survey.
- Essential nuts and bolts on nickel from the International Nickel Study Group.
— With assistance by Jake Lloyd-Smith