BEIJING: Exports of ore to China always drop at this time of year due to the rainy season, which affects both mining and shipping. But China’s trade figures for January showed imports of Philippine nickel ore were still 20 percent lower than last year’s level. And the betting is that they will continue trending lower after the Philippines’ feisty environmental minister, Regina Lopez, ordered the closure of over half the country’s mines, many of them nickel operations. Nickel bulls, however, should be wary. China’s import picture is also one of growing diversification of supply, not least from Indonesia, the other political wild-card in the nickel supply chain.
China’s imports of ore from the Philippines were 779,000 tonnes last month, the lowest January reading since 2012, when the country was still a second-tier supplier after Indonesia. All that changed when Indonesia enacted its ban on the export of unprocessed minerals, including nickel ore, at the start of 2014. The Philippines stepped into the gap left by Indonesia and has since become China’s dominant nickel ore supplier. Hence the market excitement when Lopez lived up to her previous eco-warrior credentials and ordered the closure of 23 mines and the suspension of five others, putting at risk close to 9 percent of global nickel supply.
The political storm is still raging in the Philippines itself but January’s low imports may well be the first sign of what to expect going forwards. So too, though, might be the fact that China’s overall nickel raw materials imports were still up by 4 percent in January despite that sharp drop in Philippine supply. And key to that pick-up was the apparent resumption of imports from Indonesia. China bought 123,300 tonnes from Indonesia in January, the highest monthly tally since April 2014, when Indonesian exports were winding down after the implementation of the export ban. Indonesia has this year generated its own nickel supply shock by saying it will partly relax its ban on nickel ore exports, albeit with a series of complex caveats. Has someone already started shipping ore? It seems unfeasibly fast given the government only announced its revised policy last month. And there have been occasions in the past when China’s customs department misclassified iron ore with high nickel content as nickel ore. However, this particular component of China’s nickel import picture will bear close scrutiny in the months ahead as the market tries to calculate the net impact of less ore from the Philippines and more from Indonesia.
