Philippines Ore export ban worries lift LME Nickel up

UNITED KINGDOM September 04 2014 4:25 PM

LONDON (Scrap Register): Nickel was sharply higher on Wednesday even as most of the other base metals trade weaker on the London Metal Exchange.

Nickel was boosted by reports that a senator filed a bill to ban exports of raw ore from the Philippines.

As of 10:19 a.m. EDT, three-month nickel was up $294, or 1.6%, to $18,844 a ton on a day when base metals bellwether copper was down 0.8%.

According to BMO Research, timing on the implementation -- if approved -- remains unclear. Despite the uncertainties on the credibility of this threat for the nickel market, nickel prices are already up today.

BMO Research understands that, like Indonesia, power and transportation infrastructure are challenging for smelter economics. Further, given Philippines ore is of lower quality, on average, the government would likely have to offer additional incentives to build downstream processing in the Philippines rather than in Indonesia. Nickel ore exports from the Philippines represented 9% of nickel mine supply in 2013, compared 18% for Indonesia.

According to INTL FCStone, it doubts the ban proposal will gain much traction, given massive ore exports now under way from the Philippines into China due to an Indonesian ore export ban.

Instituting a ban will result in foregoing massive amounts of revenue, not to mention the fact that buyers may very well have found other suppliers in the interim.

INTL FCStone would therefore not be jumping on this particular rally in nickel as they think the proposal will likely not enjoy broad support. Moreover, the fact that it is not being proposed by a top leader or a minister of mines makes it look all the more tenuous.