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Miners, government outlook bleak on Philippines' role in EV metals supply chain

by Philippine Resources - April 12, 2021

Despite being the world's second-largest nickel producer, the Philippines' capacity to engage in the development of a global battery metals supply chain is severely restricted due to a shortage of facilities and stringent policies, as the country's mines bureau and mining industry both agree.

"While the Philippines is a top nickel ore producer, we only have two existing nickel/cobalt processing plants that produce nickel and cobalt sulfide concentrates — intermediate products that are further processed in Japan to make electric vehicle batteries," Rocky Dimaculangan, vice president for communications at the Philippines' Chamber of Mines, or COMP, said. 

Mines and Geosciences Bureau Director Wilfredo Moncano reiterated the view of COMP, saying the Philippines "can participate in the supply of battery metals but it will be limited to the capacity of two mineral processing plants in the country put up by Sumitomo Metal Mining Co. Ltd."

"Although the country is a top supplier of nickel as export, most of these or about 70% are exported as raw, directly shipped ore and has not undergone mineral processing," Moncano said.

According to Moncano, the bureau has sent a request to Congress that would require current and new players to construct mineral processing plants that would manufacture finished and semi-finished materials. Some gold and copper mines in the United States have already built processing plants, and Moncano said the bureau hopes to see nickel and iron ore mines follow suit.

"This initiative needs legislation by Congress because MGB cannot obligate these companies to do it without a law. A resulting consequence to this one is the gradual and partial ban of raw nickel and iron ore exports as well as Congressional support for the needed infrastructure like additional electric power plants, and the reduction of power cost because it requires billion dollars to put up a medium size mineral processing plant," Moncano said, noting that electricity costs are very significant in mineral processing.

Domestic power prices are among the highest in the ASEAN region, on par with Singapore, according to the Department of Energy's Power Development Plan 2016-2040, owing to the absence of government subsidies, which are present in Thailand, Indonesia, and Malaysia.

Miners in the Philippines had planned to benefit from Indonesia's ban on nickel exports, which will take effect in 2020. However, current environmental constraints will preclude the Philippines from fulfilling China's nickel production requirements in the absence of Indonesia, according to Market Intelligence's Metals and Mining Research unit, driving Chinese primary capacity down from a projected 715,000 tonnes in 2020 to 490,000 tonnes in 2025. 

"Larger policy issues ... remain unresolved, particularly the ban on open-pit mining and the moratorium on new mining projects until a new mining tax scheme has been put in place," Dimaculangan said.

A prohibition on open-pit mining remains in effect in the Philippines, as does a restriction on new mining licenses before a new tax system is enacted.

"To encourage the building of extremely expensive mineral processing facilities and manufacturing plants for EV batteries as well as for clean energy and renewable power projects, the industry needs full government support in terms of stable mining and investment policies that do not change mid-stream," Dimaculangan said.

If the obstacles are overcome, the mining industry may be a crucial sector in the country's post-pandemic recovery, according to the COMP and the MGB.

"It stands to reason that if policy problems are not immediately resolved, the Philippines will remain an unattractive mining destination and will most definitely fall short of its tremendous potential to participate in this worldwide trend towards mineral-intensive renewable power generation and battery storage technologies," Dimaculangan said. "Otherwise, and this would be most unfortunate, the Philippines will, so to speak, miss the boat again."

For the time being, COMP sees the Philippine government's decision to authorize at least 26 new mining ventures that had been shut down by former Environment Secretary Regina Lopez to restart operations as a positive move for the industry.

Dimaculangan also expressed hope after the government decided to renegotiate the terms of its financial and technical assistance deal with OceanaGold Corp., the owner of the Didipio gold-copper mine in Quirino province.

"Once they are onstream, these projects will undoubtedly help increase the country's exports and the industry's contribution to our GDP," Dimaculangan said.

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Income of Nickel Asia Up 52%

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Philippine Resources - March 19, 2021

Nickel Prices are Forecast to Fall in 2021, According to Fitch Solutions

The costs of nickel is expected to fall in 2021 as more supply enters the market but will be supported by recovering economies, according to Fitch Solutions Country Risk and Industry Research. Fitch Solutions raised its average nickel ore price estimate for 2021 from $15,250 to $15,750 per ton in a survey. “Prices over the past few months have progressed to multi-year highs on the back of increased optimism in the market, a weakening dollar and bullish expectations about nickel supply,” Fitch Solutions said. The current nickel price is about $18,180 per ton, according to Fitch Solutions, but it will fall as supply in key markets increases. “The end of the rainy season in the Philippines will allow the resumption of nickel mining activity to feed nickel pig iron (NPI) facilities in China, its dominant nickel ore trading partner,” Fitch Solutions said. “We are maintaining our bearish outlook on prices in 2021 compared with the year-to-date average of $18,140 per ton as increasing supply over the year reduces the market deficit, maintaining lower prices.” Nickel prices are expected to rise gradually in the long run, according to Fitch Solutions, as the global market remains undersupplied. Demand is expected to remain stable due to continued growth in China's domestic construction and auto manufacturing industries, according to the study. “We forecast China’s construction sector to grow by an average of 3.8% year on year over 2021-2029 while vehicle production grows by an average of 1.2% over the same period. The rise in demand will exceed production growth in the short term, underpinning a prolonged deficit in the market and push prices higher,” Fitch Solutions said. According to Fitch Solutions, the electric vehicle (EV) market would raise nickel demand due to the need for longer-range batteries. “We expect this trend to begin taking hold over the coming years as consumers favour EVs with longer driving distance capabilities before recharging, making nickel-based battery compositions the optimal choice for vehicle producers,” Fitch Solutions said. Chamber of Mines of the Philippines Chairman Gerard H. Brimo said that policy changes that allow the Philippines to service demand from electric vehicle battery makers could help the industry. “While the Philippines is a top nickel ore producer, we only have two processing plants that produce nickel and cobalt sulfide concentrates — intermediate products that are further processed in Japan to make electric vehicle (EV) batteries,” he said. According to him, the two plants are run by Coral Bay Nickel Corp. in Palawan and Taganito HPAL Nickel Corp. in Surigao del Sur. “To enable our country to become a fully integrated EV battery supplier, certain policy changes have to be made, among them the lifting of the moratorium on new mining projects that has been in place for nearly a decade,” he said. “The industry needs full government support in terms of stable mining and investment policies that do not change mid-stream,” he added. According to the Mines and Geosciences Bureau, the volume of the metallic mining industry's production in 2020 increased 1.13 per cent year on year to P132.21 billion (MGB). Nickel ore and by-products accounted for 51.8 per cent of the total, or P68.48 billion, according to the MGB. The amount of direct-shipping nickel ore — the type in which the metal is shipped for processing overseas — increased by 3.3 per cent to 333,962 metric tons year on year (MT). Meanwhile, mixed nickel-cobalt sulfide production dropped 2.9 per cent to 49,647 MT year over year.

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