20 Dec, 2021
Philippine nickel mining to post increased 2021 production, despite heavy rains
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Industrial cargo cranes in Manila Bay, Philippines. The Philippines has managed to keep up nickel shipments despite a tough rainy season. |
The Philippines will produce more nickel in 2021 than in 2020, despite dire predictions that bad weather might lead to a shortfall.
The island nation is the second-largest nickel ore producer in the world, yielding nearly 14% of global nickel ore supplies in 2020, according to Market Intelligence data. Nickel is a key ingredient in the rechargeable batteries used in electric vehicles, and it is expected to be in shortfall in 2021. Filipino miners recovered well after unusually heavy rains in 2021, and analysts expect the country to take advantage of rising prices and produce more in 2021 than in the previous year.
Philippine Nickel Industry Association President Dante Bravo had alarmed industry watchers in October when he told reporters to anticipate a 10% miss in nickel production in the country after annual rains flooded mines, but that is no longer expected to happen.
"We forecast Philippine mined nickel production in 2021 to increase by 6% in 2021, despite expectations that the rainy season will depress output in the fourth quarter," said Jason Sappor, senior commodity analyst with S&P Global Market Intelligence.
Philippines' contained mined nickel production increased 29% year over year during the first three quarters of the year, Sappor added.
Heavy rains trigger concern
The country is experiencing a La Niña weather phenomenon, which, according to the Philippine Atmospheric, Geophysical and Astronomical Services Administration, means above-normal rainfall conditions in many areas in the country for several months. For the first nine months of 2021, Philippine nickel miner Global Ferronickel Holdings Inc., which Bravo heads, reported sales of 4.2 million wet tonnes of nickel ore, declining 3.4% year over year from 4.4 million wet tonnes. The company attributed the decline to bad weather conditions, which allowed the group to ship 78 vessels of nickel ore, compared to the 80 vessels in the prior year.
But miners recovered quickly.
"Tonnage catches up during the post-typhoon season months," Gabriel Pamintuan Jr., an engineering professor at the University of the Philippines Diliman, said.
Bravo's company may have been unusually effected by the rain. Mitzi Sumangil, associate commodity analyst S&P Global Market Intelligence, explained that the eastern Philippines, which is home to 24 out of the 32 nickel mines reported by the Mines and Geosciences Bureau, or MGB, generated 77% of January to September nickel in direct shipping ore, or DSO, production.
"The most vulnerable locations during this time are on eastern Philippines, which faces the Pacific Ocean ... The share of western miners is growing in terms of contained nickel in DSO production. It may be possible that mines on western Philippines will offset some operational losses due to inclement weather," Sumangil said. "I feel that PNIA President Dante Bravo might be loosely referring to his actual company or members of PNIA when it comes to that 10% decrease comment."
High prices bode well
Amid global production woes and a 2020 Indonesian export ban on nickel ore in place, Philippine nickel ore miners have been enjoying favorable prices of the commodity as the economy recovers from the impacts of the COVID-19 pandemic and as demand for electric vehicles increases. After slumping since 2015, Philippine nickel ore production has been on the rise, totaling 333,962 tonnes in 2020, higher than 323,325 tonnes in 2019, Mines and Geosciences Bureau data showed. And despite the rains, other companies have exceeded their 2020 production. Nickel Asia Corp., a top Filipino nickel ore producer said that its nickel ore shipments from January to September increased year over year to 14.4 million wet tonnes from 14.0 million wet tonnes.
Global Ferronickel reported an overall average realized nickel ore price of US$30.78 per wet tonne in the nine months ended Sept. 30, 20.4% higher than US$25.56 per wet tonne in the same period a year ago. Similarly, Nickel Asia reported an average realized export price of US$38.69 per wet tonne in the first three quarters, 27% higher than US$30.53 per wet tonne in the year-ago period.
Sappor forecast that Philippine mined nickel production will rise by a compound annual growth rate of 9% between 2021 and 2025 to roughly 500,000 tonnes.
"Nickel ore prices have been relatively stable and in fact, increasing over the last two years," PNIA's Bravo told Market Intelligence. "Because of good prices, the lower grade ores have been commercially viable thereby expanding the current ore reserves and can extract ores even at longer hauling distances, hence optimizing the use of ores. That's how we benefitted from the Indonesian ore ban."