nickel
A lighted underground tunnel in a nickel mine

A lighted underground tunnel in a nickel mine.

Nickel price news from the Philippines as the top nickel producer now has three-quarters of its mines reeling from an audit with 20 mines facing suspension and 10 already in suspension, according to a recent report from Bloomberg.

The mines under fire account for 56% of nickel production by value last year, Leo Jasareno, environment undersecretary, told reporters this week, according to Bloomberg.

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“They have to get their act together,” Gina Lopez, environment secretary told the news source. “We cannot allow any mining company to operate and make millions while the people is suffering. That’s against the law.”

Meanwhile, nickel climbed as much as 2% this week on the London Metal Exchange, its peak since Aug. 12.

“The impact, or the potential impact, warrants a premium,” Daniel Hynes, senior commodities strategist at Australia & New Zealand Banking Group Ltd., told the news source, regarding the Philippine mines audit.

Crackdown Boosts Nickel-Ore Prices

In addition to the boost in nickel prices, the Philippine mine shutdowns also highlight worries of how to secure dependable sources of key industrial ores used to make metals, notably in Asia.

“I have no beef against mining, but I am vehemently against what is happening,” Lopez said at a news conference, according to The Wall Street Journal. “There are mining companies that have passed…it can be done.”

How will nickel and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

 

Nickel prices got a boost on Tuesday after the Philippines announced plans to suspend 20 more mines.

3M Nickel price on the LME. Source: MetalMIner analysis of fastmarkets data

Three-month nickel price on the LME. We recommended hedging back in June. Source: MetalMIner analysis of fastmarkets data.

The country already suspended 10 mines during the third quarter. The Philippines is by far the largest nickel ore supplier to China since Indonesia imposed an export ban for unprocessed material back in 2014. Lower production is already showing up in the numbers. Philippine nickel production is down 24% for the first seven months of this year. This supply deficit will widen as more mines are suspended.

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Combining the previously suspended mines with those in the new announcement, only one fourth of Philippines mines comply with the country’s environmental and mining laws. It’s estimated that this combination accounts for half of the Philippines’ nickel production last year.

What This Means For Metal Buyers

In our Monthly Outlook, we recommended in June buying nickel/stainless forward one-year out. The new shutdowns are likely to further tighten the global nickel market, which could provide another attractive entry point for nickel/stainless buyers to hedge/buy forward again. To catch these opportunities, buyers only need a good a plan.

The Philippines shut down 20 more mines recently, further curtailing nickel exports to China. There’s a chance a major Brazilian iron ore miner will divest some of its assets.

More Filipino Nickel Mines Shut Down

The Philippines has suspended 20 more mines for environmental violations, most of them nickel, a government official said on Tuesday, bringing to 30 the number of mines shuttered.

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The suspended mines account for 55.5% of nickel ore output in the Philippines based on last year’s production, Environment and Natural Resources Undersecretary Leo Jasareno told a news briefing.

Brazilian Iron Ore Miner Looks to Sell

Cia Siderúrgica Nacional SA is considering selling part of its stake in Congonhas Minérios SA, Brazil’s No. 2 iron ore producer, to China Brazil Xinnenghuan International Investment Co., two people familiar with the deal told Reuters on Monday.

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According to the people, the Chinese mill known as CBSteel is interested in buying about 25 percent of Congonhas directly from CSN. They said CSN, as Brazil’s No. 2 listed flat steelmaker is known, would remain in control of the unit, adding that talks are advancing slowly and may not necessarily result in a deal.

After gaining sharply in June and July, our Stainless MMI retraced last month. Nickel’s rally cooled down in August after a pick up in Indonesian ferronickel supply rekindled previous fears of a global supply shortage.

Philippines Supply Declines

In June and July, nickel rallied as the Philippines reviewed all existing mines in order to close those that had adverse impacts on the environment.

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At least eight nickel mines have been shut down so far this year, cutting around 10% of the country’s capacity.

Stainless_Chart_September-2016_FNL

The Philippines is by far the largest nickel ore supplier to China since Indonesia imposed an export ban for unprocessed material back in 2014. Recent numbers are already showing this decline in production. For the first seven months, China imported 13.84 million metric tons from the Philippines, down 27% from the same period last year.

The current disruptions in the Philippines have no doubt tightened the market for nickel ore triggering a price rally this year. However, in August investors questioned whether this shortage in China’s nickel-pig iron industry will actually translate into a shortage of nickel in the global market.

Indonesian Refined Nickel Supply Picks Up

While supply of nickel ore to China is declining due to current disruptions in the Philippines, supply of refined nickel to China is rising as Indonesia ramps up production.

China’s imports of ferronickel from Indonesia came at a five-times higher-rate than the amount taken in the same month a year earlier. For the first seven months, China’s imports of ferronickel from Indonesia surged more than four-fold to 390,700 mt. Comparing apples to apples, the nickel content of the year to date of ferronickel exports equals about 4 million mt of nickel, slightly less than the 4.13 mmt loss in the Philippines so far this year.

For this reason, we hear some analysts saying that China isn’t importing less nickel, it is just changing the form in which it imports the metal. And, as prices retrace, it’s no wonder that this reminds us to what happened just two years ago when nickel prices soared to then fall precipitously.

Is This Time Different?

Back 2014, nickel prices surged as Indonesia prohibited ore exports. However, prices sold-off later on as miners in the Philippines moved into the trade. This time, it’s the other way around. Environmental restrictions are shrinking supply in the Philippines while Indonesia is making up for that loss.

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While prices fell in August, we need to be reminded that prices don’t move in a straight line and that, so far, the decline seems like normal after nickel gained over 30% in June and July. Also, there are two other factors that make us think that the decline won’t be as severe as back in 2014:

  • Back in 2014, nickel prices rose independently while the rest of the industrial metal complex was falling. This time, it’s not only nickel but we also see many industrial metals rising. The bullish sentiment on base metals this year should help limit nickel’s fall.
  • It’s barely been a month since the Philippines started to shut down mines and volumes may be squeezed further after the shutdowns accounting for about 15% of output. Recently, the Philippines’ mining minister said that there will absolutely be more suspensions following the eight already suspended.

For these reasons, we wouldn’t turn bearish on nickel just yet…

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3M LME Nickel. Source: MetalMiner analysis of fastmarkets data

Three-month LME Nickel. Source: MetalMiner analysis of Fastmarkets.com data.

After a two-month rally in June and July, nickel prices are retracing in August. What caused nickel to rally and what is causing prices to fall in August?

Philippines Supply Down

In June and July, nickel rallied as the Philippines reviewed all existing mines in order to close those that had adverse impacts on the environment. At least eight nickel mines have been shut down so far this year, cutting around 10% of the country’s capacity.

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The Philippines is by far the largest nickel ore supplier to China since Indonesia imposed an export ban for unprocessed material back in 2014. Lower production is already showing up in the export numbers. For the first seven months, China imported 13.84 million metric tons from the Philippines, down 27% from the same period last year.

The current disruptions in the Philippines have no doubt tightened the market for nickel ore triggering a price rally this year. However, will this shortage in China’s nickel-pig iron industry translate into a shortage of nickel in the global market?

Indonesian Refined Nickel Supply Up

While supply of nickel ore to China is declining, supply of refined nickel to China is rising. For the first seven months, China’s imports of ferronickel from Indonesia have surged more than four-fold to 390,700 mt. Comparing apples to apples, the nickel content of the year to date ferronickel exports equal to about 4 million mt of nickel, slightly less than the 4.13 mmt loss in the Philippines so far this year.

For this reason, we hear some analysts saying that China isn’t importing less nickel, it is just changing the form in which it imports the metal.

What’s Different From 2014?

Nickel prices surged back in 2014 to later come down. Source: MetalMiner analysis of fastmarkets data

Nickel prices surged back in 2014 to later come down. Source: MetalMiner analysis of fastmarkets.com data.

Back 2014, nickel prices surged as Indonesia prohibited ore exports. However, prices sold-off later on as miners in the Philippines moved into the trade. This time, it’s the other way around. Environmental restrictions are shrinking supply in the Philippines while Indonesia is making up for that loss.

Free Download: The August 2016 MMI Report

While prices have fallen in August, so far the decline seems like a normal price retracement after nickel gained over 30% in June and July. Also, there are two other factors that make us think that the decline won’t be as severe as it was in 2014:

  • Back in 2014, nickel prices rose independently while the rest of the industrial metal complex was falling. This time, it’s not only nickel but we also see many industrial metals rising, which bodes well for rising nickel prices.
  • It’s barely been a month since the Philippines started to shut down mines and volumes may be squeezed further after the shutdowns accounting for about 15% of output.

What This Means For Metal Buyers

The supply and demand balance for the coming months will depend on how many more mines the Philippines shut down versus how much more ferronickel/refined nickel Indonesia continues to supply. So far, we believe it’s to early to call for the end of nickel’s bull run.

Nickel symbol handheld in front of the periodic tableNickel futures traded down Tuesday this week due in part to a burgeoning overseas trend and subdued demand.

The London Metal Exchange was the source of this weakening trend with sluggish demand attributed to alloy makers in the domestic spot market, according to a report from The Economic Times.

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Nickel wasn’t alone in its LME downward trend as most industrial metals retreated on the heels of commentary from the Federal Reserve, which fueled speculation that U.S. borrowing costs will rise in the coming year. Read more

Tin prices are up as shipments have fallen off and the Philippines is, once again, considering a raw ore export ban in a bid to bolster local processing.

Tin Shipments Fall, Prices Rise

Falling shipments from top tin exporter Indonesia and predictions that a surge in mining in Myanmar is tapering off has led to a scramble for the metal, sending inventories to the lowest level in over seven-and-a-half years.

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This provides a potential for further price gains for the metal mainly used to make solder for the electronics industry, already the second-best performer among industrial metals this year.

Filipino Lawmaker Revives Ore Ban

A Filipino lawmaker has revived a proposal to ban exports of unprocessed minerals to spur domestic processing, in a move that may tighten global nickel supply and make it an even tougher business environment for miners in the world’s top producer.

Free Download: The August 2016 MMI Report

The Philippines has vast but largely untapped mineral resources, limiting the contribution of mining to its economy to less than 1%. The sector is now facing a tough regime under the government of firebrand President Rodrigo Duterte who has suspended some miners causing environmental destruction.

We rarely see such positive growth in metal prices as we did in the August MMI Price Trends Report.

MM-IndX_TRENDS_Chart_August2016_FNL-TOPVALUE100

All the metals we track were up save for Aluminum, which fell only 1.3%, and renewables and rare earths, which held flat. The Stainless Steel MMI increased 9% amid uncertainty about Chinese nickel ore supply after mining crackdowns in top supplier, the Philippines.

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Meanwhile, the most bullish of bull runs continued for our Global Precious MMI which added a 7.2% increase to its jump last month to knock on the door of the top 10% of the IndX. The platinum group metals had strong increases along with gold and silver this month.

Wall Street Bull

“Hey metal buyers, remember me?” Wall Street bull courtesy of iStock.

Palladium, particularly, made higher highs and stumbled to lower lows in classic bull market fashion.

So buy quickly before prices increase more, right? Wrong. Our Raw Steels MMI posted a healthy 4% increase, but it’s still heavily dependent on China’s stimulus programs to keep demand up in the largest global consumer of steel products. If there is a pullback in stimulus, prices could fall dramatically. The same is true for copper.

Unlike diamonds, bullish trends in commodities and industrial metals don’t last forever. Continue to make informed buying decisions in this thriving market — watch China’s stimulus program and the strength of the U.S. dollar post- Brexit — and remember that today’s price strength might be tomorrow’s carpet getting pulled out from under your feet.

Vale SA is looking to sell part of its future iron ore output for Chinese cash today and the Philippines’ nickel mining crackdown has claimed its seventh victim.

Vale Brings in Chinese Investors

Brazil’s Vale SA is considering raising as much as $10 billion from the sale of up to 3% of future iron ore output to undisclosed Chinese companies, two sources with direct knowledge of the matter said.

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Under terms of the deal, Vale, the world’s biggest iron ore producer, would receive streaming financing from the companies.

Philippines’ Crackdown Claims 7th Nickel Miner

The Philippine government has suspended the operations of a seventh nickel miner, Claver Mineral Development Corp., a minister said on Thursday, deepening an environmental crackdown that has caused jitters in global nickel markets.

Free Download: The July 2016 MMI Report

The Philippines is the biggest supplier of nickel ore to top market China and the suspension of some mines and the risk of more closures sent global nickel prices to an 11-month high of $10,900 a metric ton on July 21.

Nickel price investment trading arrow going up rising strong indDespite nickel prices going on a hot streak — having climbed 40% since bottoming out at the beginning of the year — many nickel miners are seeing diminishing returns on their production.

According to a recent report from the Financial Post, Sherritt International Corp., a Canadian nickel miner, announced recently that more than half of global output is losing money with the percentage of underwater production even higher when capital spending and other costs are factored in.

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“This rally in the last few weeks is perhaps more robust than some false starts we’ve had over the last year,” David Pathe, chief executive at Sherritt, told the Financial Post. “But it’s got a ways to go before we think we’re at a long-term nickel price that’s sustainable.”

Prior to the recent surge, nickel prices had been a victim to lagging demand, rising inventories and supply from the Philippines in recent years. The recent increase in nickel prices has been partially attributed to speculation that new environmental regulations from the Philippine government will spur mine closures yet only a few small mines have actually been shut down so far, the Financial Post stated.

Nickel Imports Rise

According to a recent piece from our own Raul de Frutos, nickel, along with zinc, have benefited from higher demand coming from China.

de Frutos stated: “In the case of nickel, the supply shortage comes as the new mining minister in the Philippines, Regina Lopez, said that there would be a ban on fresh mining exploration in the country for a month while all existing mines are being reviewed. At present, the Philippines is the top supplier of nickel ore to China and these new developments have sparked concerns about ore supply to China.”

You can find a more in-depth nickel price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.