Manila – Oct 14 (Reuters) – Seasonal rains are set to disrupt nickel mining in the Philippines for the next four months or so, crimping exports to top buyer China and stoking a shortfall in the global supply of ore.
Miners in the Philippines say they will be able to fulfil their 2014 contracts as they have factored in the impact of the annual monsoon.
But, with a ban on raw metal shipments by former top exporter Indonesia, the seasonal decline in the Philippines’ output could force China’s vast stainless steel industry to run down its stocks of nickel ore, reigniting a rally in nickel prices.
Most producers in the Philippines’ main nickel mining region of Caraga are expected to close operations as normal from October or November until early next year in anticipation of heavy rains. The Philippines has emerged as the top supplier to China’s producers of nickel pig iron, a key ingredient in stainless steel.
“They (China NPI makers) are definitely going to be caught short,” said Daniel Hynes, analyst at ANZ in Sydney. “Obviously they’ll just have to dig into their inventory to meet demand in the shorter term or look at importing some ferronickel from various sources.”
Nickel laterite ore is found mostly in Indonesia, the Philippines and New Caledonia, and has been increasingly manufactured into NPI by stainless steel mills as a cut price alternative to refined nickel.
Those firms have blended lower grade ore from the Philippines with their remaining Indonesian stocks to stretch them out, although analysts say stockpiles may be depleted early next year.
Expectations that China’s stainless steel mills would run out of ore after Indonesia’s ban helped benchmark nickel prices surge more than 50 percent by May. They have since cut gains to around 20 percent for the year, standing at around $16,550 a tonne.
“The Philippines has been exporting record volumes of nickel ore,” said Ivan Szpakowski, a Hong Kong-based commodities strategist for Citi.
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