The global nickel market has recently experienced a significant downturn, marked by a sharp decline in nickel prices, plummeting by over 50% within 12 months. This unsettling trend has reverberated across nickel mines worldwide, impacting the Philippine mining industry.
As nickel prices continue their downward spiral, Philippine mines face mounting challenges, necessitating new strategies, and fortifying the industry’s resilience amidst uncertain market dynamics. What factors are driving the price of this critical metal down, and what implications does it hold for Philippine nickel mines?
Understanding the Nickel Market Dynamics
Nickel, primarily utilized in stainless steel production and recently designated as a critical mineral by the USGS, has witnessed its prices decline, due to an influx of cheap supply from Indonesia. China's substantial investments in Indonesia's Morowali Industrial Park have bolstered Indonesia's influence on global nickel supply chains.1
Consequently, China’s ownership of processing units has enabled it to control nickel production, influencing prices worldwide. This influence poses a significant challenge to global nickel mines, including those in the Philippines.
The reactions of the global nickel industry, characterized by mine closures and production halts, foreshadow potential challenges for Philippine mines if prices continue to slump without government intervention.
Canadian miner First Quantum Minerals (TSX: FM) was the first to take a hit after it announced the suspension of its Ravensthorpe nickel mine operation in Western Australia.2 Panoramic Resources (ASX: PAN), entered voluntary administration, ceasing mining activities at their Savannah nickel mine.3
Construction works at cosmos nickel operation by IGO (ASX: IGO) was halted.4 BHP also shut down its nickel processing plant in Western Australia following Wyloo Metals’ announcement to temporarily close its nickel mine.5
Finally, Glencore (LON:GLN) announced it will sell its stake in Koniambo Nickel SAS (KNS) in New Caledonia and that production at KNS's processing plant will be halted for six months while a new investor is sought for the loss-making business.6 Despite closure of these mines, nickel continues to slump, putting the entire industry in uncertainties.
Impact on Production and Investment
The decline in nickel prices will exert pressure on mining companies operating in the Philippines. With lower prices, many mining operations will face reduced profitability, prompting some companies to balance cost and production output.
Investment in new mining ventures will also be affected by the downturn in nickel prices. Investors, cautious of uncertain returns amid price volatility, will become more selective in funding mining projects.
This cautious approach will slow down the development of new nickel mines and exploration activities in the Philippines, impacting the long-term growth prospects of the industry.
Among the nickel projects on the line are the following:
- Nickel Asia Corporation’s Bulanjao Mine and Manicani Mine
Last April 2023, Nickel Asia Corporation (NAC) (NIKL: PSE) The country’s largest nickel producer announced that it will bring two (2) more nickel mines in three years and assess the viability of another HPAL Plant. Nickel Asia is targeting annual nickel ore production of at least 4 million wet metric tonnes (WMT) from the Bulanjao mine, near its existing Rio Tuba mining site in the southwestern Palawan province, and at least 2 million WMT from Manicani mine in central Samar province.8
- Philex Mining Corporation’s Nickel Project
Philex Mining Corporation (PX: PSE) also announced in September 2023 it is looking into developing their nickel property in Zambales. Philex has been trying to raise capital for this project along with its Silangan Copper Mine in Surigao.
- DMCI Mining Projects
DMCI Mining also announced it would spend about P250 million to develop a nickel mining project in Zambales. It will be developed inside an existing field operated by subsidiary Zambales Diversified Metals Corp. (ZDMC) and to be run by another unit, Zambales Chromite Mining Co. (ZCMC). It is estimated to produce approximately 20 million metric tons (MT).9
Employment and Economic Implications:
The nickel mining industry is a significant contributor to employment and economic development of the country. However, the effects of low nickel prices will affect local communities and economies dependent on mining-related activities.
A decline in mining investments and production can lead to job losses and reduced income opportunities for workers in the sector and related industries. Moreover, the ripple effects of a slowdown in mining activities can be felt across supply chains, affecting businesses that provide goods and services to the mining sector. As a result, communities reliant on mining for livelihoods may experience economic hardship and social challenges.
Environmental and Social Considerations
The closure of nickel mines can have far-reaching consequences for ecosystems and local communities, underscoring the need for responsible mining practices and stakeholder engagement.
As mines grapple with economic pressures, environmental stewardship and social responsibility must remain central tenets of their operations to mitigate adverse impacts and foster sustainable development. Striking a balance between economic development and environmental sustainability remains a complex challenge for policymakers and stakeholders in the Philippine mining sector.
Outlook and Opportunities
The effects of low nickel prices on the Philippine mining industry are multifaceted, impacting production, investment, employment, and environmental sustainability. While nickel prices are influenced by global market dynamics beyond the control of domestic stakeholders, the Philippine mining sector must adapt to navigate the challenges posed by price volatility.
In response, mining companies may explore strategies for operational efficiency, cost optimization, and increased production. Policymakers on the other hand can show its support for the industry through policy support and stability, investment incentives and infrastructure development.
As the Philippine mining industry continues to evolve amidst fluctuating nickel prices and evolving regulatory frameworks, proactive measures and strategic partnerships will be crucial to ensuring the sector's long-term viability and contribution to national development.
Stay strong nickel!
Edison Domilies Mating is a mining engineer based in Australia. He has worked with major mining companies mostly with Lepanto Consolidated Mining Company in Benguet. He is the owner of Cordillera Gems, a business specializing in high-visibility workwear apparel for the mining industry. He holds a Bachelor of Science Degree in Mining Engineering from Saint Louis University (SLU) where he also serves as an industry academic board member. Edison volunteers as a career ambassador for Canada's Mining Industry Human Resources (MiHR) Council.
References:
- Bloomberg. (2022, December 15). Chinese companies are flocking to Indonesia for its nickel. https://www.bloomberg.com/news/articles/2022-12-15/chinese-companies-are-flocking-to-indonesia-for-its-nickel
- ABC News. (2024, January 15). Ravensthorpe nickel mine to cut 30 per cent of workforce as mining ramps down. https://www.abc.net.au/news/2024-01-15/ravensthorpe-nickel-mine-to-cut-30-per-cent-of-workforce-as-mini/103322050
- Australian Mining. (2023, December 15). Panoramic Resources enters voluntary administration. https://www.australianmining.com.au/panoramic-resources-enters-voluntary-administration/
- Mining.com. (2024, January 30). IGO puts Cosmos nickel mine on care and maintenance. https://www.mining.com/web/igo-puts-cosmos-nickel-mine-on-care-and-maintenance/
- Australian Mining. (2024, January 23). BHP shuts down WA nickel processing plant. https://www.australianmining.com.au/news/bhp-shuts-down-wa-nickel-processing-plant/
- Reuters. (2024, February 12). Glencore to halt New Caledonia nickel plant, sell stake. https://www.reuters.com/markets/commodities/glencore-halt-new-caledonia-nickel-plant-sell-stake-2024-02-12/#:~:text=Feb%2012%20(Reuters)%20%2D%20Glencore,for%20the%20loss%2Dmaking%20business.
- Trading Economics. (2024, February 13). Nickel. https://tradingeconomics.com/commodity/nickel
- Reuters. (2023, April 25). Nickel Asia to open two more Philippine mines, eyes power unit IPO. https://www.reuters.com/article/nickel-asia-philippines/update-1-nickel-asia-to-open-two-more-philippine-mines-eyes-power-unit-ipo-idUSL4N2ZS1JK
- Inquirer Business. (2023, September 26). DMCI Mining readies 2 new sites after breaking 2022 Record
