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Geopolitical climate primes Philippines for battery metals market impact

The current geopolitical climate is conducive for the Philippines to make huge strides in the burgeoning battery metals market, but it needs to improve its standing among investors to take advantage of the favorable conditions, an analyst for a commodities market firm said.

Ian Hiscock, the head of consulting for Southeast Asia for CRU, said in his Mining Philippines 2019 conference presentation Sept. 11 that the current geopolitical environment, including the deepening U.S.-China trade war, has been unusual and may lean in favor of the Southeast Asia region.

Among the key drivers seen to favor the region include the acceleration of green technology, particularly in the production of certain minerals crucial for battery-makers, including copper and nickel.

By the mid-2020s, the total cost of ownership will favor electric vehicles over internal combustion engine vehicles, while battery prices will see a decline. There remains a barrier to electric vehicle availability, but that will be reduced when original equipment manufacturers ramp up production.

Philippines vs. Indonesia

The themes seen in the Southeast Asian region are nationalism in the Philippines coupled with resource security and pollution issues in China. Indonesia, meanwhile, is projected to surpass China as the biggest nickel pig iron producer in five years, on top of multiple high-pressure acid leach, or HPAL, nickel operations in the pipeline.

However, the Philippines, which has been one of the top producers for both copper and nickel, must look at neighboring Indonesia as a case study for growth and make itself a more enticing jurisdiction for investment.

Citing data from the World Bank's ease of doing business index, Hiscock said Indonesia has steadily improved its conditions, ranking 73rd in the world, while the Philippines "is going the other way" and ranked 124th in the survey. The index uses quantitative indicators on business regulations and protections of property rights.

"Indonesia is 20% to 30% of global mine supply, whether it's got an ore ban or not. Despite that chaotic history, it's now doing some things right, doing some things well, so it's an easier place to do business and it's made big improvements in the last five years," Hiscock said, noting the country is also making strides in terms of permit applications and labor reforms in the sector.

Meanwhile, Hiscock noted that new Indonesian HPAL operations are untested but said the capital intensity for those operations is "surprisingly low" when pitted against other HPAL projects, including the Philippines' Taganito HPAL refinery, a joint venture between Sumitomo Metal Mining Co. Ltd., Mitsui & Co. Ltd. and Nickel Asia Corp.

Project capital expenditures and technical problems have plagued HPAL operations in the past, but data cited in Hiscock's presentation has shown that the issues may have been resolved through shared infrastructure or improved equipment.