Philippines Deepens Crackdown on Its Mining Industry
The Philippines deepened a crackdown on its mining industry on Wednesday as world’s top nickel shipper announced it will suspend more than 10 mines in addition to 10 halts that have already been made, saying it wants to surpass Canadian and Australian standards.
The government is finalizing results of an environmental audit and will make recommendations on what companies should do after their suspension, Environment Secretary Gina Lopez told reporters in Manila.
She didn’t identify which mines were included in the latest round, with details now due Monday.
The global nickel market has zeroed in on the environmental checkup initiated by President Rodrigo Duterte amid concern that it will constrict the flow of ore to China, the largest metals market.
The country has about 40 metallic mines, of which more than half produce nickel.
Futures rallied in August to the highest level in a year as the early suspensions took effect, and banks, including Goldman Sachs Group Inc., have flagged the potential for further advances.
“We should be much better than Canada or Australia because we’re an island,” Lopez told reporters after repeated delays in releasing the audit’s full findings. The Philippines comprises thousands of islands, with most nickel mining found in Palawan in Surigao provinces. “More than 10 mines will be suspended.”
In the run-up to Wednesday’s comments, Secretary Lopez signalled there would probably be more suspensions, as well as state support for workers laid off. The country will close more mines including some large-scale operations after the audit, Lopez told reporters on Sept. 5. Earlier this week, she said the government could tell more mines to stop operating.
Nickel futures surged to as much as $11,030 on the London Metal Exchange last month as the audit got under way, with 16 teams fanning out across the country to check on the mines for compliance. On Wednesday, the metal pared losses, trading 0.4 per cent lower at $10,265 a ton at 4 p.m. in Manila after losing 1.3 per cent earlier.
Goldman Sachs has warned that further Philippine suspensions may push ore stockpiles to critically low levels.
Its base-case outlook assumed a further 15 per cent of Philippine supply being halted for six months, following the loss of 10 per cent, according to a Sept. 12 note.
The bank said refined nickel may surge to $12,000 a ton by year-end.
Mines that are suspended may reopen if they are able to fix shortcomings, according to Environment Undersecretary Leo Jasareno. The government is optimistic that the drive to clean up the industry will act as lure to stimulate investment, not a deterrent, Jasareno told Bloomberg.
Last year, nickel-ore shipments from the Philippines totaled 32.3 million tons, down from 33.1 million tons in the year before, according to mines bureau data.
Most cargoes go to China to make stainless steel, with the Southeast Asian nation accounting for about 20 per cent of global mined nickel output.
Global nickel demand exceeded supply in the first half, with a deficit of 80,800 tons compared with a surplus of 45,200 tons in all of 2015, according to the World Bureau of Metal Statistics. Stockpiles in LME-tracked warehouses have fallen 17 per cent to 365,784 tons this year, the lowest since October 2014.