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”.[1] 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.[2]

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?

-----

Reference:

[1] http://jorc.org/docs/historical_documents/kng_mcmahon1982.pdf

[2] http://www.jorc.org/

-----

Photo credit:

Top photo - Night cityscape in Indonesia by Abd Katon, https://pixabay.com/users/katon765-12184997/ 


Place your Ad Here!


Related Articles

Mining

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

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

Mining

Marcelle P. Villegas - October 26, 2021

PH Nickel Industry Association Launched Their SDG Report

October is United Nations Month with its main celebration last 24 October 2021. In response to the United Nations Sustainable Development Goals (UNSDG), the Philippine Nickel Industry Association (PNIA) launched their first sustainability report to highlight the industry’s contribution and impact to local communities for 2020. They presented their report via a Zoom media launch last 20 October 2021. This online event is the 4th episode of the Nickel Initiative Webinar Series. The sustainability report is titled “Global Goals, Local Action – Sustainability as our way of life in nickel mining”. From PNIA’s press release, “The report underscores the industry’s social and economic contributions in the country consistent with the UN SDG global policy goals which are policy framework aimed at achieving sustainable living for current and future generations.” PNIA is a non-stock, non-profit association that was established in 2012. PNIA was organised “to be the single voice of the industry in championing and positioning the nickel development sector as a globally-competitive and responsible driver of inclusive and sustainable economic growth in the Philippines”. PNIA is registered with the Securities and Exchange Commission. October is United Nations Month with its main celebration last 24 October 2021. In response to the United Nations Sustainable Development Goals (UNSDG), the Philippine Nickel Industry Association (PNIA) launched their first sustainability report to highlight the industry’s contribution and impact to local communities for 2020. They presented their report via a Zoom media launch last 20 October 2021. This online event is the 4th episode of the Nickel Initiative Webinar Series. The sustainability report is titled “Global Goals, Local Action – Sustainability as our way of life in nickel mining”. From PNIA’s press release, “The report underscores the industry’s social and economic contributions in the country consistent with the UN SDG global policy goals which are policy framework aimed at achieving sustainable living for current and future generations.” PNIA is a non-stock, non-profit association that was established in 2012. PNIA was organised “to be the single voice of the industry in championing and positioning the nickel development sector as a globally-competitive and responsible driver of inclusive and sustainable economic growth in the Philippines”. PNIA is registered with the Securities and Exchange Commission.


Recent Articles

Industry

Philippine Resources - May 26, 2022

Legal framework needed for gov’t to invest in nuclear power plant

Department of Energy (DOE) Undersecretary Gerardo Erguiza Jr. said there is a need to amend the Electric Power Industry Reform Act (EPIRA) to enable the government to invest in nuclear power plants. This, as the incoming administration has expressed its support in considering a nuclear power plant to be part of the country’s energy mix. “As of now, the government does not have the ability to put up conventional nuclear power plant because the National Power Corp. does not have mandate on this,” Erguiza said in Filipino during the Laging Handa public briefing Wednesday. With the privatization of the power sector under the EPIRA, the government could not enter into power generation. “But we can align together, with the drafting or putting up of the regulatory framework, we can amend our laws to include the government among those that can fund a nuclear power plant,” he added. Erguiza said that based on studies of the Korean Hydro Nuclear Power Company of South Korea and ROSATOM of Russia, they have found out that the Bataan Nuclear Power Plant (BNPP) can still be rehabilitated. According to ROSATOM, an investment of around USD3 billion to USD4 billion is needed to revive the BNPP. Presumptive President Ferdinand “Bongbong” Marcos Jr. earlier mentioned that part of his energy agenda is to revive the BNPP to become an additional source of clean and cheap power. On the other hand, Erguiza said the government can invest in power generation using small modular reactors, the latest nuclear energy technology, in missionary areas that are not connected to the grid. 

Construction

Philippine Resources - May 26, 2022

Dutch gov’t backs SMC, Boskalis in P740 billion Bulacan Airport project

Photo credit: Palafox Dutch gov’t backs SMC, Boskalis in P740 billion Bulacan Airport project San Miguel Corporation (SMC) received its strongest support yet for its game-changing P740-billion New Manila International Airport (NMIA) project in Bulacan following the approval of the Dutch government of an export credit insurance (ECI) for the project’s land development phase. The approval comes after over a year of rigorous review of the project’s long-term environmental and social impact mitigation measures to ensure that the multi-billion project is done with sustainability in mind and aligned with the country’s climate ambitions. The Dutch government, represented by Atradius Dutch State Business (DSB), extended the ECI to Royal Boskalis Westminster N.V., to cover its EUR 1.5 billion contract for land development works at the airport project site in Bulakan, Bulacan. The NMIA project is the largest in Boskalis’ over 100-year history, and is also the largest export credit agency (ECA) insurance policy granted in the 90-year history of Atradius. SMC President and Chief Executive Officer Ramon S. Ang thanked the Dutch government for its support to NMIA, a project seen to catalyze sustainable economic growth for the Philippines, especially post-pandemic. It is seen to deliver over a million jobs to Filipinos. “This is a significant milestone not only for San Miguel and the NMIA project, but for the entire country. With this, we are closer to our dream of having a world-class, future-ready, and sustainably-built international gateway, proudly built by Filipinos for the Philippines. This also validates our work with Boskalis to ensure that this project is done right, and will provide long-term economic, environmental, and social benefits to our host communities and Bulacan province,” Ang said. In a statement posted on Boskalis’ international website, its CEO Peter Berdowski, said: “I am very pleased that all the hard work with a large team of experts has been successfully completed (today). For more than a year, we have worked intensively with Atradius DSB to ensure that the construction of the new airport will take place in a socially responsible manner.” He added: “In collaboration with Atradius DSB, the Dutch embassy, we succeeded in developing a broadly supported plan with an eye for the local community and the preservation of biodiversity. I would like to thank all those involved for their contribution to the positive decision of the State.” In the same statement, Atradius DSB Managing Director Bert Bruning said: “This project is unique on so many levels. Firstly, of course, as a very important contract for our client Boskalis, but also for us, as the largest ECA policy in our 90-year history,” he said. “In addition, I am proud of the fact that together with Boskalis and San Miguel, by keeping up the dialogue, we were able to ensure that the project is to meet international standards in the field of environmental and social conditions. In doing so, we have not only contributed to making this wonderful contract possible built also really made a difference together for the local communities and nature.” As part of the ECI process, a large group of experts from San Miguel, together with Boskalis and four renowned consultancy firms, conducted an extensive environmental and social impact assessment in accordance with the highest international standards. This process also included the conduct of impact analyses and compensation packages for adverse effects of the project. “This shows that the airport project and our environmental and social mitigation plans are not only sound, but robust and strong, given they can pass not only international standards but the exacting requirements of the Dutch government. It is another testament to the ability of Filipinos to be world-class,” Ang said. “We will continue to work with Atradius, the banks, experts, national and local government, and all stakeholders to ensure we will build this project in a sustainable manner and in compliance with the highest international environment and social standards,” Ang reaffirmed. added. The airport project will feature four parallel runways, a world-class terminal, and a modern and interlinked infrastructure network that includes expressways and railways.    Article courtesy of San Miguel Corp

Company

Philippine Resources - May 25, 2022

CTPCMC Allocates 7.7M for COVID-19 Initiatives

Article by: Roniel R. Arguillas - CTPCMC ICE Officer BAYANIHAN AMIDST THE COVID-19 BATTLE In order to protect and improve the lives of the people within the host and neighboring communities pursuant to Republic Act (RA) No. 11469 or the “Bayanihan to Heal as One Act”, CTP Construction and Mining Corporation or CTPCMC allocated 7.7 million pesos intended for the implementation of projects, programs, and activities (PPAs) on COVID-19 prevention. Through its Social Development and Management Program (SDMP) under Adlay Mining Project (AMP) and Dahican Nickel Project (DNP) the company implemented essential PPAs in the year 2021. The beneficiaries of PPAs were from the Host and Neighboring communities specifically Barangay Adlay, Barangay Dahican and Municipality of Carrascal. With an allocated budget of P2,060,803.78, a Covid-19 Assistance Center was put up to be the second line of support to the host communities if their existing Isolation Rooms have been fully occupied. The company’s employees and their dependents are to be prioritized in the center. The center is offering services which include free isolation room for those who are identified and confirmed as covid-19 patients, free vitamins, and over-the-counter drugs, 24/7 monitoring by health personnel and stand-by oxygen concentrators. Another PPA was the provision of 59 medical equipment and kits to Barangay Adlay. The provision included pulse oximeter, thermal scanner, LCD full digital ultrasound machine, hospital bed and refrigerator as vaccine storage. The turnover was done on December 14, 2021, held at Barangay Hall of Adlay. It was attended by Engr. Charlo R. Basadre CTPCMC Resident Mine Manager, Charid O. Cuadrillero ComRel Manager, Hon. Norberto O. Rubi Jr. Barangay Captain, and Raquel Bungcaras assigned nurse.  “These are very essential and a huge help to the key front liners and to the people within the community.” Hon. Rubi said during the turnover. The company also provided two SDMP Emergency Response Vehicles for health-related emergencies.

Join the Philippines'

Mining and Construction Community

Be the "First" to get our exclusive Digital Magazine & Newsletter.