How Indonesia Beat the Philippines to Become the World’s Undisputed Nickel Pig Iron (NPI) Producer (and Likely to Replicate this as a Battery Feedstock Supplier)
by George Bujtor, Marcelle Villegas - August 21, 2021
Night cityscape in Indonesia [Photo credit: Abd Katon]
commentary written by George Bujtor, with foreword by Marcelle Villegas
When Indonesia announced the reimposition of their nickel export ban in 2019, why were many key players in the Philippine mining industry optimistic about this? Was their optimism based on the belief that Indonesia is out of the game due to their nickel export ban? Did the Philippines really benefit from Indonesia’s export ban on laterite nickel ores?
What actually happened is that during the years when Indonesia halted their laterite nickel ore exports to the world, outsiders still got their nickel supply from Indonesia by investing in the country, thus giving them internal access to Indonesia’s nickel. This investment strategy brought a win-win situation to both Indonesia and their foreign investors. This is an angle of the Indonesian nickel export ban story which is disadvantageous to the Philippine nickel industry. But are the industry players in the Philippines aware of this?
To give an in-depth analysis on what really happened to the Philippine nickel industry while Indonesia was implementing their nickel export ban, top Australian mining executive and CEO of Electric Metals Limited, George Bujtor shares his thorough research about the matter.
For background, George Bujtor has extensive work experience in technical, financial and commercial aspects of mining operations. He is one of the authors of a paper titled “A Guide to the Understanding of Ore Reserves Estimation”. The paper was published by the Australasian Institute of Mining and Metallurgy in March 1982 and was the basis for the development of the JORC Mineral Code used worldwide today. This study is a remarkable peer-reviewed journal and significant reference of most international mining studies and academic research in relation to JORC studies and Mineral Reporting Code.
His career is notable as past General Manager and Managing Director during his 22 years in Rio Tinto, Australia, and as former CEO of Aldoga Aluminium, Australia. On his first years in the Philippines, he developed the Berong Nickel mines in Palawan as CEO of Berong Nickel Corporation. Following this, he became the CEO of Carmen Copper Corporation/Atlas Mining where he successfully raised over US$200M in bond issue for the expansion of the mine and processing operations.
He held numerous Board positions and is a Fellow of the Australasian Institute of Mining and Metallurgy, and is a Competent Person as defined by the JORC & NI 43-101 codes (Australasian Joint Ore Reserves Committee).
Here’s an extensive report, analysis and forecast by George Bujtor about the current situation of the Philippine nickel industry.
Indonesia banned the export of laterite nickel ores in 2014 and went all out in developing its value-added nickel processing industries. In seven years, over US$30 billion has been invested into NPI (nickel pig iron) production facilities and stainless-steel plants with associated power stations, infrastructure development, industrial zone developments, skills development, employment opportunities, and so on.
Today, there are over 115 RKF plants (Rotary Kiln Electric Arc Furnaces) and 3 stainless steel plants operating in Indonesia. Yearly, these process plants convert over 50 million tonnes laterite nickel ore into approx. 800,000 tonnes nickel metal in the form of NPI, stainless steel sheet and sections, etc. The value-added nickel products generate over US$15$B billion in revenue every year, some 15 times higher than if the country exported unprocessed laterite ores.
In the same time horizon, from 2014 till today, there has been ZERO investment in value added nickel processing in the Philippines. This has resulted in a massive lost opportunity for the Philippine economy and its people. Short-term thinking, the lack of a coherent minerals policy and the lack of an ore export ban has rendered the once promising nickel industry in the Philippines irrelevant. The export of laterite ores to China will inevitably disappear as Chinese RKF plants and blast furnaces operations relocate to Indonesia for cost and environmental reasons. The Philippines will be left with abandoned mines and impoverished communities, and no stainless-steel industry.
Some pertinent questions one can ask include: Where is the development road map proposed by the Philippine Nickel Industry Association in 2019? Why is the Chamber of Mines not being proactive and pushing for in-country value added processing? Where is the Government resource policy to address the wholesale exporting of unprocessed ores? Will the Philippines ever have a stainless-steel industry?
This is a two-part series of articles on the Philippine laterite nickel Industry:
Part 1 – How Indonesia Beat the Philippines to Become the World’s Undisputed Nickel Pig Iron (NPI) Producer
Part 2 – Will the Philippines be Able to Succeed in the Battery Feedstock sector and Become a Battery Cell Producer?
Philippine Laterite Nickel/Cobalt in Perspective
The Philippines has the world’s third largest resource of nickel metal in laterite ores (~14Mt contained nickel) and the world’s fourth largest resource of cobalt metal (~1.3Mt contained cobalt):
This is an enviable position and one which should confer considerable advantages to the host country. Unfortunately, the Philippines has not capitalized on its industry leading position.
Between 2005 and 2020 inclusive, the Philippines had exported in total ~300 million tonnes of laterite ore averaging ~1.2% Ni and containing some 3.6 million tonnes contained nickel metal. Over the last five years, exports averaged ~25Mt per year laterite containing ~300,000 tpy contained nickel. Most of the laterite nickel was exported to China to feed the numerous NPI plants and blast furnaces servicing the stainless-steel industry.
As reported by the MGB, the revenue generated from the export of the ~300Mt of laterite ore amounted to approx. US$7.8B (equivalent to ~US$28/t ore). Whilst this may seem like a lot of money, it is an extremely poor return for the Philippines. Had this laterite ore been converted to NPI or stainless steel, the revenue would have been over US$65B to US$75B, some 8 to 10 times higher. Regional economic development would have been much higher, more extensive, and sustainable.
In contrast, in 2021 Indonesia is forecast to export ~800,000 tonnes contained nickel metal in NPI which is conservatively valued at ~ US$15B. This is some 10 times the value which might have been generated from the export of the ~50Mt of laterite ore.
The Philippines has always favoured the export of laterite ores over in-country processing and continues to do so. Mining companies celebrated on hearing Indonesia had banned the exports of laterite ore. However, this is all short-term thinking and does not recognizing the consequences over the medium term. The “quick” returns from the direct shipping of ore will be short lived and certainly not in the national interest. High grading of the remaining laterite deposits is just one consequence.
The Indonesian Ban on the Export of Unprocessed Ores
Indonesia introduced a ban on the export of unprocessed laterite nickel ores in 2014 after passing legislation in 2009 and providing the industry with a five-year grace period. Only Tsingshan took the Governments legislation seriously. At the time of the ban, Indonesia was exporting over 41 million tonnes laterite ore to China. The short-term pain was a silver lining in disguise.
The export ban was specifically intended to force the nickel ore miners to invest in value added processing. History shows the impact has been profound and Indonesia has emerged as the world’s dominant producer of nickel over the last 7 years. The export window opened a little in 2017 to help ore miners to raise funds to build processing plants but was firmly shut again at the end of 2019.
The impact of the export ban resulted in two investment waves. The first wave involved Chinese NPI operators relocating and ‘offshoring’ to Indonesia as shown in the chart below. Tsingshan led this first wave and is the dominant producer of NPI in Indonesia.
Today Indonesia produces more NPI than China, and by 2025 will produce ~5X the tonnage of Ni in NPI.
The offshoring of nickel plants to Indonesia is expected to continue and will result in a diminishing market for laterite ores from the Philippines. As shown, NPI production in China
is forecast to fall to 250,000 tpy contained nickel by 2025. With NPI production costs being 30% to 40% cheaper in Indonesia, the offshoring of Chinese production plants is likely to accelerate. This is all bad news for the Philippines’ nickel export industry.
The second wave of investment involved the building out of stainless-steel plants using the hot metal feed from the NPI furnaces. This was likewise led by China’s Tsingshan. Today there are three stainless steel plants in Indonesia with further plants planned.
To date, over US$30B has been invested by mainly Chinese companies in nickel processing plants in Indonesia. In the same time horizon, there has been no investment in the Philippines. We should not be surprised. Why invest in the Philippines when laterite ore can still be easily purchased and there is no export ban?
The lack of nickel investment in the Philippines has been due to a number of factors including – failure to implement a coherent minerals policy, excuses by mining companies about the lack of electricity, most mining companies chasing the quick “buck”, “greed”, and overall lower laterite Ni grades compared to Indonesia. The Indonesia Government made the hard decisions and has been rewarded accordingly. Companies investing in Indonesia built their own power stations to underpin their operations. The same could have been done in the Philippines.
Indonesia and China now Control the Stainless-Steel Market
Indonesia and China now control the stainless-steel market and account for over 70% of worldwide stainless-steel production. This dominant position will only increase as more NPI plants and stainless-steel plants are built in Indonesia. By 2025, Indonesia and China will produce a combined annual 1.5Mt of Ni metal equivalent in NPI, amounting to >50% of worldwide primary nickel supply. This has all been on the back of the export ban of laterite ore.
Would an Ore Export Ban Today Help the Philippines Recover its Lost Position in Stainless Steel?
The answer is very simply ‘No’. The race has been run and won by Indonesia. This was all predictable many years ago especially after Indonesia banned ore exports in 2014. It is almost impossible now to entice investors into NPI/Stainless steel in the Philippines. The NPI and stainless-steel market is fully controlled by China and its large corporations. Even if the Philippines were successful, it would always be a price taker and never a price setter.
The only option available for the Philippines is to watch its laterite ore export market for NPI/Stainless steel slowly disappear. This is inevitable.
Indonesia has become the envy of many countries on its successful policy of resource nationalism. The Indonesian laterite nickel ore boom has morphed into a stainless-steel boom and may soon become a battery-materials boom.
Having lost the race for dominance in the NPI/stainless steel boom, is the Philippines positioned to take advantage of the battery-materials boom?
This and other questions will be answered in Part 2 of this series: Will the Philippines be Able to Succeed in the Battery Feedstock sector and Become a Battery Cell Producer?
Top photo - Night cityscape in Indonesia by Abd Katon, https://pixabay.com/users/katon765-12184997/
Philippine Resources - September 20, 2021
Global nickel production to recover by 6.8% in 2021, supported by Indonesia and the Philippines, says GlobalData
Photo credit: GlobalData Global nickel mine production is expected to grow by 6.8% to reach 2,427.4 thousand tonnes (kt) in 2021, after registering an estimated 4.2% decline to 2,272kt in 2020, owing to COVID-19-related lockdowns and restrictions, says GlobalData. The leading data and analytics company notes that output from Indonesia (+16.3%), the Philippines (+5.1%) and Brazil (+24%) will be significant contributors to the overall growth this year. In contrast, production is expected to decline in Russia (-13.8%), and South Africa (-15.8%). Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Combined production from Indonesia, the Philippines and Brazil is expected to increase from a collective 1,160kt in 2020 to 1,316.8kt in 2021 – an increase of 13.5%. The increase in production will be supported by the expansion of Indonesia’s nickel industry, the resumption of production at various mines in the Philippines and the ramp up at the Santa Rita mine in Brazil, which was previously halted in 2015. “Overall, Indonesia and the Philippines will remain as the largest sources of nickel globally. Together with Russia, New Caledonia and Australia, these five countries account for almost three-quarters of the global total.” Looking ahead, nickel production over the forecast period is expected to grow at a compound annual growth rate (CAGR) of 3%, to reach 2,730.6kt in 2025. Indonesia, Russia, Canada and the Philippines will be the key contributors to this growth. Combined production in these countries is expected to increase from a forecasted 1,607kt in 2021 to 1,818.4kt in 2025. Bajaj continues: “Projects with potential to commence operations during the forecast period include the Araguaia Nickel project in Brazil, which is wholly owned by Horizonte Minerals, and is currently awaiting a final investment decision (FID). The US$402.1m project will have an annual nickel production capacity of 14.5kt and is expected to commence operations in 2022. During early 2021, the project’s infrastructure including the award of construction licences for the transmission line and the water pipeline were approved by the company. Tenders for the supply of key equipment and services have been completed for approximately US$230m.” The Aquila Nickel project in Indonesia, which is wholly owned by Solway Investment Group, has obtained its regulatory approvals and permissions. The US$57m project will have an annual nickel production capacity of 16.6kt and is expected to commence operations in 2023. Article courtesy of GlobalData
Marcelle P. Villegas - July 03, 2021
PH Nickel Industry Association on Women in Mining
The role of women in the mining industry is a daily reality that needs more awareness, sensitivity and acceptance. Last 30 April 2021, Philippine Nickel Industry Association presented their third episode of the Nickel Initiative Talks and Webinars Series with the title “Promoting Sustainable Development by Advancing the Role of Women in Mining”.
Philippine Resources - August 06, 2021
Nickel Asia nets P2.73B in 1st half of 2021
Nickel Asia Corporation announced its unaudited financial and operating results for the six-month period ended June 30, 2021 with an attributable net income (net of minority interest) of P2.73 billion, a 579% increase from P401.4 million reported during the same period last year. Earnings before interest, tax, depreciation, and amortization (EBITDA) amounted to P5.34 billion, a 157% increase compared to P2.08 billion in the prior year. The higher net income was the result of higher ore sales prices and volume. The Company sold a total of 8.3 million wet metric tons (WMT) at the weighted average realized price of $25.47 per WMT in the first half of 2021 compared to 7.3 million WMT at $16.02 per WMT in the same period last year. Breaking down the ore sales, the Company exported 4.56 million WMT of saprolite and limonite ore at the average price of $37.50 per WMT in the first six months of 2021 compared to 3.28 million WMT at $26.03 per WMT in the same period last year. Likewise, the Company delivered 3.74 million WMT of limonite ore to Coral Bay and Taganito HPAL plants, the prices of which are linked to the LME, and realized an average price of $7.92 per pound of payable nickel. This compares to 4.02 million WMT at $5.68 per pound of payable nickel in 2020. Furthermore, owing to higher LME prices, the Company recognized gain from its equity share in its investments in the two HPAL plants in the combined amount of P244.1 million in the first half of 2021 compared to a loss of P70.6 million in the same period last year. The realized Peso to U.S. Dollar exchange rate for ore sales was P48.26 compared to P50.49 in the prior year. However, the exchange rate at the end of first half of 2021 stood higher at P48.80 compared to when it started the year at P48.02, thus the Company reported net foreign exchange gains of P190.6 million. This compares to the net foreign exchange losses of P101.7 million reported in the first half of last year. Total operating cash costs increased by 26% year-on-year to P5.15 billion from P4.10 billion in 2020. On a per WMT sold basis, total operating cash costs increased to P621 per WMT compared to P562 per WMT in 2020. “Demand for nickel remains strong due to surging stainless steel output, driven by the recovery of the construction, manufacturing, and oil and gas sectors, and accelerating demand from the EV battery industry,” said Martin Antonio G. Zamora, President and CEO of the Company. “Further, nickel supply disruptions, due in large part to the Indonesian ore export ban and COVID-19 related lockdowns, provide additional support to the price of nickel,” Mr. Zamora added. Article Courtesy of The Philippine Stock Exchange
Philippine Resources - September 24, 2021
DOTr, Pasay City sign deal for monorail, flyover extension
Residents and those working in Pasay City will soon enjoy easier public transportation after the Department of Transportation (DOTr) and the city government signed a deal for the construction of a monorail and extension of the Epifanio Delos Santos Avenue (Edsa)-Tramo flyover. In a live broadcast on Facebook on Wednesday, DOTr Secretary Arthur Tugade and Pasay City Mayor Emi Calixto-Rubiano signed the memorandum of agreement (MOA) for the proposed Integrated Pasay Monorail and Edsa-Tramo flyover extension project. Tugade said the project will be interoperable with the Light Rail Transit Line 1 (LRT-1), Metro Rail Transit Line 3 (MRT-3), the Edsa Busway, and the Edsa Greenways. “[Ito ay] makapagbibigay ng mas mabilis at episyenteng biyahe sa mga pasahero. Magiging mas madali na rin ang access patungong central business district (CBD) ng Pasay (This will provide fast and efficient travel to passengers. Access to Pasay CBD will also be easier),” Tugade said. Aside from its benefits to commuters, he said the project will also create jobs. “Ang paulit-ulit kong sinasabi na karugtong ng mga proyekto para sa kaunlaran ay trabaho para sa Pilipino (What I have always been saying is that development projects go hand-in-hand with jobs for Filipinos),” Tugade said. He said the project is a partnership between the DOTr, Pasay City government, and SM Prime Holdings. “Makakaasa 'ho kayong magpapatuloy ang DOTr sa pagsusulong ng mga proyekto para sa ikauunlad ng pampublikong transportasyon sa bansa (You can be rest assured that the DOTr will continue to promote projects for the development of public transportation in the country),” Tugade said. The MOA signing was witnessed by Pasay City Vice Mayor Noel del Rosario, DOTr Undersecretary for Finance Giovanni Lopez, Undersecretary for Legal Affairs Reinier Paul Yebra, Undersecretary for Railways Timothy John Batan, SM Prime Holdings President Jeffrey Lim, and other representatives from the Pasay City government and the private sector. On Sept. 7, the Pasay City government and the SM Prime Holdings made a joint presentation on the project to the DOTr. By Raymond Carl Dela Cruz Article courtesy of the Philippine News Agency
Philippine Resources - September 24, 2021
DOTr eyes GenSan airport as alternate int'l gateway
Photo credit: Department of Transportation The Department of Transportation (DOTr) is pushing for the inclusion of the newly rehabilitated and expanded airport here as among the alternate gateways for returning Overseas Filipino Workers (OFWs) and international travelers. DOTr Secretary Arthur Tugade proposed the move on Thursday as he personally led the formal unveiling and inauguration of the city airport’s new passenger terminal building and other completed facilities. He said the city’s international standard airport can accommodate airline passengers coming in from as far as the Middle East. Tugade said it can be realized once the proposed increase in the daily cap for returning OFWs, currently at 2,000 for the Ninoy Aquino International Airport (NAIA), is approved. Once the cap is expanded, he said NAIA might “choke” with the influx of airline passengers from various countries. “If we will increase the cap, we need to expand our gateways and not limit them to Clark, Cebu, and NAIA. We can include GenSan among the gateways for travelers from Doha who are going to Manila,” he said in a press conference. He said they will propose such strategy with the airlines serving the international routes, including the Philippine Airlines, and seek the approval of the city government. The other possible alternate gateways could be the Laoag International Airport in Ilocos Norte and the Bohol-Panglao International Airport, Tugade said. The rehabilitated and expanded General Santos Airport passenger terminal building, which was completed early this month, is part of the PHP959-million upgrade implemented by the national government. The other completed components are the procurement and installation of navigational aids and the construction of the new Civil Aviation Authority of the Philippines (CAAP) administration building at the airport. Under the project, Tugade said the passenger terminal area has tripled in size from 4,000 to 12,000 square meters. “This will allow the airport to accommodate more passengers and provide them comfortable and convenient travel,” he said in his speech. A DOTr report said the larger passenger terminal building can now accommodate around 2 million passengers annually, a significant jump from the previous 800,000 per year. Tugade said the improvement at the city airport will continue next year with the upgrading of its air control tower, which he considered as “too low.” He said they will build a “higher and modernized” tower in 2022 to make it “more world-class” and can easily adjust to the needs of the airport. The official said the upgrading of the airport, which started in 2018, is among the agency and the national government’s top priorities in Mindanao. He said the initiative is part of the government’s efforts to bring more progress and economic opportunities in Mindanao, which “suffered from long years of neglect in terms of development.” Tugade said they endeavored to implement these projects despite the challenges posed by the continuing coronavirus disease 2019 (Covid-19) pandemic to pursue their goal of giving a “comfortable and convenient life” to Filipinos. “After the pandemic, we want all these developments in place and ready to benefit the people,” he said. In a video message, President Rodrigo Duterte commended the DOTr, the local government, and concerned stakeholders for completing the projects at the city airport amid the Covid-19 pandemic. He said the city has “gone a long way” in terms of the development of its air connectivity and airport facilities. “The rehabilitation and expansion of the airport passenger terminal building, among others, will truly boost General Santos City’s role as an agro-industrial and eco-tourism hub,” the President said. City Mayor Ronnel Rivera lauded the national government for helping the city realize its dream of having an international-standard airport. Aside from the expanded passenger terminal building, the airport is now capable of accommodating bigger aircraft like Boeing 737 and 747, as well as Airbus A330, A340, and A350. “(What) we are seeing now is a result of multisectoral commitment and dedication in various stages of the airport development, which includes coordination of several initiatives, preparation of the airport master plan, operations, and marketing,” he said. The mayor said the local government will continue to engage with prospective investors and airlines for the opening of more flights to and from the airport and the development of adjacent areas. He cited the proposed establishment of an aerotropolis or growth area centered on the city airport and its surrounding areas. “We are opening a wide array of opportunities, not only on the improvement of our infrastructure facilities but also in terms of investments that will generate more economic opportunities for the city and the entire region (Soccsksargen),” he said. Aside from the inauguration of the airport projects, Tugade also led the unveiling of completed initiatives at the Makar port here. The DOTr said it includes the construction of the Port Operations Building and other vital facilities, which includes a parking area, covered court, port manager’s quarter or Day Care Center, and drainage system. “The improved port of Makar will now offer safer, comfortable, and a more convenient port experience to passengers, while ensuring a faster turnaround for vessels, cargo trucks, and other ancillary service providers,” it said. Article courtesy of the Philippine News Agency
Philippine Resources - September 22, 2021
Cebu-Cordova Link Expressway 83% Complete
Photo credit: Cebu-Cordova Link Expressway As of August 31, 2021, the construction progress of the Cebu-Cordova Link Expressway (CCLEX) project was at 83.84 percent. The P30-billion toll bridge, which will be substantially completed by the end of 2021, will use a full electronic toll system when it opens to motorists in the first quarter of 2022 to enable faster traffic flow and seamless travel. The project recently marked a milestone with the completion of the installation of all 56 stay cables that hold the main bridge deck. On September 11, the Cebu Cordova Link Expressway Corporation (CCLEC), through its contractor, installed the last and longest stay cable, which is 219 meters long. The gap on the main bridge, on the other hand, is now down to only two meters before span closure and preparations are underway for the lowering of the form travelers. These form travelers, which weigh 500 tons in each tower, were used to construct the main bridge’s pier table and deck. Also, all 434 NU (Nebraska University) girders for the entire project have already been installed. With this, the mobile launching gantry used to install the girders have been demobilized. At the Cebu South Coastal Road (CSCR) on ramp and off ramp sections of CCLEX, construction of its substructures is complete. Ongoing works are now on the installation of precast planks and the concreting of deck slab. Also finished is the 200-meter pedestrian footbridge beside the CSCR with all six prefabricated steel walkways already installed. The footbridge will start near the U-turn slot of the South Road Properties’ welcome tower and will connect to the on-ramp sidewalk of CCLEX. At the Cebu viaduct, the construction of deck slab is ongoing. The Cordova viaduct, on the other hand, is now structurally complete with its substructure already done. Installation of handrails are underway. At the causeway, embankment works continue to progress with the placing of 20 vent pipes, which equalize the flow of seawater along the Cordova Channel, is finished. Also structurally complete are the four low-level bridges along the causeway, which will provide fishermen continued access to their fishing grounds. Aside from these, works are ongoing for the toll plaza and the CCLEX Operations and Maintenance Center. CCLEX, highlighted by its iconic crosses on top of the twin pylons of the cable-stayed main bridge over the Mactan Channel, is Metro Pacific Tollways Corporation’s (MPTC) first toll road project outside Luzon. CCLEX, which will be the third link to Mactan Island from Cordova Municipality to mainland Cebu through Cebu City’s South Road Properties, has a design speed of 80 kilometers per hour (kph) and a navigational clearance or height of 51 meters to allow large vessels to pass underneath the bridge. Not only is CCLEX seen to reduce traffic and make traveling more convenient but also spur trade activities and open greater economic opportunities for Cebu and the rest of the Visayas region. CCLEX is a project of Cebu Cordova Link Expressway Corporation (CCLEC), in partnership with the local government units of Cebu City and Municipality of Cordova. CCLEC is a wholly owned subsidiary of MPTC, the toll road arm of Metro Pacific Investments Corporation (MPIC), a publicly listed infrastructure holding company and a member of the MVP Group of Companies. MPTC is the largest toll road concessionaire and operator in the Philippines, which expansion goals include establishing toll operations in the Visayas, other parts of the Philippines, and in neighboring countries notably Vietnam, and Indonesia. Article courtesy of Cebu-Cordova Link Expressway