The price of Nickel rose sharply as traders placed bets on supply pressures reverberating from a decision by the Philippines to close almost two dozen mines.
On the London Metal Exchange, Nickel, used to make stainless steel, reached $10,500 a tonne Thursday after President Rodrigo Duterte’s government ordered the closure of 23 mines – mostly Nickel. The closure decision came following the results of a government audit that investigated the mines’ role in degrading the environment. The audit of 41 mines, started last summer.
It is estimated that the mine closures affect roughly half of the Philippines’ annual mining output, or around 8 percent of global Nickel supply. The country is one of the largest sources of unprocessed Nickel ore, and a major supplier to China, which uses it to make pig iron, a cheaper alternative to refined Nickel. Even before the audit, 11 mines were shut down for failing to comply to stricter environmental rules.
Mainly used as an anti-corrosive in steel alloys, Nickel rallied in 2016 on the back of a clampdown on mines in the Philippines which took over as the main supplier to China following an ore export ban in Indonesia in place since 2014.
The market was rocked earlier this month when Indonesia abruptly announced a partial lifting of the ban allowing exports of up to 5.2 million tonnes of Nickel ore in 2017.
Capital Economics, a London-based independent research house, said Nickel prices should rise 20% this year based on tightening market conditions including constrained supply from the Philippines.
An analyst quoted by the Financial Times said that last week’s news from the Philippines would likely offset the increased Nickel supply from Indonesia, thus preventing any price slippage.
“We regard any supply-side shift of more than 5 per cent as sufficient to alter the short-term price,” the FT quoted Tom Price, an analyst at Morgan Stanley. “So this potential 8 per cent event is significant.”