The Race is On: Philippines Considers Banning Shipments of Unprocessed Nickel

The Race is On: Philippines Considers Banning Shipments of Unprocessed Nickel

By Brad George

Nickel prices jumped 5 percent last week on the back of unconfirmed reports that the Philippines may be considering following Indonesia in banning the export of raw, unprocessed nickel ores to China.

London Metal Exchange nickel for three-month delivery increased to $19,498 per tonne, representing a 38-percent gain year-to-date.

Last Thursday, the Financial Times reported that a Filipino senator had listed a bill for debate, proposing a ban as a mechanism for promoting investment in downstream processing. The notion was then given additional weight after the country's environment minister backed the proposal.

The Philippines remains the only major supplier of high-grade nickel laterite, known as nickel pig iron (NPI), to Chinese mills following the withdrawal of Indonesia from the market in January this year. There is little evidence to suggest the bill has serious support; however, the news was sufficient to add additional concerns about supply tightness.

Historically, nickel was dominantly sourced from sulfide ore bodies, such as Norilsk, Sudbury, Thompson and Kambalda. But as these mines aged, nickel laterite ore bodies began to make a contribution despite their more complex metallurgy.

However, when China entered the metal markets at the start of the century, nickel production could not keep pace with this new source of demand. Sulfide resources were decreasing and becoming increasingly deep and difficult to mine, while the enormous capital cost of major laterite projects, coupled with several high-profile, multibillion-dollar project failures in Western Australia, slowed the pace at which these huge resources could be developed. The combination of these factors inexorably drove nickel prices northward to a peak in March 2007 of over $55,000 per tonne.