Philippines set to become world’s top nickel ore producer again, surpassing Indonesia

20, Sep. 2019


By Darlene Basingan

MANILA, NNA – The Philippines, the second-largest producer of nickel ore, may soon become the top exporter and producer of raw material, with local miners expected to increase their output next year while hoping the government will finally approve more mining projects in the country.

Indonesia, currently the world’s top producer of nickel ore, announced earlier this month it will stop nickel ore exports from 2020 in its ambition to enhance domestic refining of mineral resources so that it can sell high value-added nickel products like stainless steel.

“With the Indonesian ore export ban, the Philippines will again be the largest exporter of nickel ore in the world. And soon, such export is going to be an important economic driver,” Dante Bravo, president of the Philippine Nickel Industry Association, said in an email interview with NNA.

The Philippines ranked first in nickel exports until 2017 but was replaced by Indonesia the following year, as Indonesia had partially relaxed its ban on nickel ore exports. Most of the Philippines’ nickel ore is being exported to China, the world’s biggest nickel consumer, according to Bravo.

The Philippines produces low- to high-grade raw nickel ores, but much of its exports now is medium-grade ore, according to Bravo. Nickel accounts for 44 percent of metallic mineral output in the Philippines, the largest resource worth 26.6 billion pesos ($510 million), followed by gold and copper, government data shows.

Indonesia’s ban, which may push prices of nickel up as a result of less supply, is expected to encourage Philippine nickel ore miners to increase their output beginning next year.

Bravo said the industry might be able to ship out about 40 million dry metric tons of nickel ore in 2020, up from 25.9 million dry metric tons in 2018, adding they expect a significant sales increase in lower grade ores.

“With improved ore prices, there would again be a market for (low- to medium-grade ores), so these ore categories would add volume to the market,” said Bravo. He noted, however, that the anticipated ore output increase in the Philippines is “unlikely to fill in the gap created by the ban.”

Wilfredo Moncano, director of the Mines and Geosciences Bureau under the Department of Environment and Natural Resources, noted the country’s nickel ore production may still be restricted even if demand for lower grade nickel ores increases.

“In the case that market demand for lower grade nickel ores has changed, nickel ore production may still be restricted due to the production limit imposed by (miners’) respective Environmental Compliance Certificates,” Moncano said in a response to NNA’s enquiries.

In 2018, the Philippine government began imposing limits on the areas allowed to be mined by miners depending on their annual production.

Aside from promoting the nickel industry, nickel miners believe the country could further benefit from Indonesia’s ban if Manila lifts its moratorium on new mining projects.

The Philippines is prohibiting new mining projects or agreements until the passage of legislation that would “rationalize” the government’s share in the revenue of miners, he said.

Nickel production here went up by only 3 percent to 11.3 million dry metric tons in the first half of 2019 from 11 million dry metric tons in the same period in 2018, data from the country’s Mines and Geosciences Bureau showed.

Nickel output has been declining since 2014 and went down further in 2016 after the Philippines’ environment department cracked down on miners not compliant with environmental regulations and suspended their operations.

A number of mining firms have already been allowed to operate. Currently, there are 31 nickel mines operating in the Philippines, but 16 of which reported zero production.

Despite the opportunity to capitalize from Indonesia’s absence in the nickel ore market in 2020, Moncano said the government has no plans yet to implement measures that would help further boost nickel ore output.

Nicholas Mapa, senior economist at the ING Bank Manila, said the Philippines may benefit from the Indonesia ban in the short term but may be locked into exporting lower value-added raw materials as Indonesia begins to exporting higher value-added finished metals.

“Much will depend on the political situation and how the mining industry will cope with current regulations,” Mapa said.

“I would actually hope for the Philippines to follow suit and look to expand not just the exports of raw materials but look to develop higher value-added products for export,” he added.

Moncano noted value-adding has long been the government’s objective for the nickel industry but it is constrained in doing so primarily due to the country’s high electricity costs.

“Since mineral processing plants require a lot of power, the cost of electricity is a disincentive to set one up. This, therefore, needs the support of Congress to reduce electricity costs or give incentives,” Moncano noted.