[SMM Analysis] Following Indonesia's Ban on Ore Mining? Can the Philippines' "Ore Mining Ban" Policy Impact the Nickel Industry

SMM May 9 News:

Recently, there has been much discussion in the market about the Philippines' ore export ban policy, with news suggesting that "the Philippine government plans to implement a nickel ore export ban starting from June 2025." Djoko Widajatno, a member of the Mining Advisory Council of the Association of Philippines Nickel Industries (APNI), also stated that despite Indonesia being the world's largest nickel producer, many domestic smelters still rely on nickel ore supplies from the Philippines, especially for the increasingly scarce high-grade nickel ore in the country. The Philippine ban may trigger a global nickel ore supply crunch and price increases. While it may benefit local nickel miners in the short term, it will drive up the operating costs of smelters that rely on imported raw materials.

In fact, this issue has sparked discussions earlier this year.

On February 3, 2025, the Philippine Senate passed a bill banning nickel ore exports. Currently, the bill is under review by a bicameral committee and has not yet been signed into law. The subsequent review of the bill will take place after the Congress reconvenes in June, and discussions will begin. Meanwhile, Senate President Francis Escudero expressed the hope that a bicameral committee could review the bill in consultation with members from both chambers. Escudero said at a briefing, "I hope it can be completed during the recess so that we can approve it when we reconvene." The bill aims to promote the downstream development of the mining industry by banning the export of raw ore, he said. "We hope to shift from merely exporting raw ore that other countries use to produce higher-value products to developing our own processing capabilities. This will increase the value-added of our mineral-related exports, provide a much-needed boost to our economy, and create job opportunities for our people. Due to the push from green initiatives such as EV production, the demand for critical minerals like nickel and copper has increased over the past few decades. Nickel and copper are key components in the production of lithium batteries for EVs. If we can harness the potential of these minerals, we can secure a place in the global supply chain, particularly in EV battery production, and perhaps one day, we can even have our own EVs. If the bill is signed into law, it will be implemented in five years to give miners time to build processing plants." If the bill is passed, we will eventually have ore processing capabilities, marking a transformation for the country," said Escudero, who drafted the third and final versions of the bill.

The Philippines is the world's second-largest supplier of laterite nickel ore. According to SMM statistics, the Philippines shipped 54 million mt of nickel ore throughout 2024, with approximately 43.5 million mt going to China and 10.35 million mt to Indonesia.In recent years, the country's government has been attempting to learn from Indonesia, the world's largest nickel supplier, in expanding mining revenue by urging miners to invest in processing facilities rather than merely exporting raw ore.

However, it is widely believed within the industry that the Philippines is unlikely to fully replicate Indonesia's ore export ban, primarily due to the following factors:

1. Infrastructure Backwardness: Indonesia has relatively well-developed infrastructure, capable of attracting foreign investment in supporting smelting and downstream factories. In contrast, the Philippines has relatively backward infrastructure, with less than 30% coverage of mine roads and outdated port facilities, resulting in transportation costs accounting for over 20% of the selling price.
2. Economic Structure Vulnerability: Despite a five-year transition period outlined in the bill, only three small smelters are currently planned for construction, far from enough to absorb the existing export volume. In comparison, Indonesia had already established an economic buffer zone through diversified industries (such as palm oil and rubber) and an initial scale of downstream processing industry chains before the 2014 ore export ban, whereas the Philippines lacks similar foundations.
3. Basic Resources Insufficient to Support Smelting Project Investment: Indonesia has relatively abundant hydropower, coal, and other resources, while the Philippines' industrial electricity price reaches $0.18/kWh (compared to $0.1 in Indonesia), with poor power supply stability and high industrial electricity prices.
4. Relatively Low Investment Feasibility: Philippine nickel ore has a relatively low grade, making it more suitable for hydrometallurgy to produce MHP. However, hydrometallurgy involves high investment costs, long construction periods, and certain technical barriers.
5. Nickel Industry Surplus or Difficulty in Launching New Projects: The global nickel market is experiencing a supply surplus, and the integrated layout of nickel resources by leading enterprises has nearly been completed. SMM predicts that the global nickel resource supply surplus will widen in 2025 and beyond. If the Philippines implements an ore export ban to develop downstream industries, it will face issues such as limited market space and difficulty in guaranteeing profits, making it challenging to attract corporate investment.
6. Political Decentralization and Interest Group Obstruction: Local governments in the Philippines have actual control over mineral development, and central policies are often hindered by local environmental interventions or judicial disputes (such as the 2020 mine closure incident in Mindanao). The Chamber of Mines of the Philippines and the Philippine Nickel Industry Association have stated that the proposed export ban "will lead to mine closures" and "reduce government revenue and economic activities in mining communities." Local interest groups may subsequently become significant obstacles to the implementation of this bill. Additionally, the top ten mining companies control 80% of the country's nickel production and are deeply involved in legislation through political contributions and lobbying, whereas Indonesia has formed a community of interests by introducing foreign investment, thereby weakening the interference of private capital in policies.

Additionally, in the second half (H2) of 2016, the Philippines attempted to rectify its mining industry by using environmental protection as a starting point, but this effort was ultimately unsuccessful. However, the ban on the export of critical minerals is not unique to Indonesia; in fact, it is a global trend, albeit to varying degrees.

According to data from the Organisation for Economic Co-operation and Development (OECD), from 2009 to 2020, approximately 53 countries implemented export bans on critical minerals. For example, Namibia banned the export of unprocessed lithium and other critical minerals, while Zimbabwe banned the export of chromium. The motivation behind the policy of "banning the export of raw ore" is understandable, and its economic benefits are quantifiable.

Taking Indonesia as an example, data from the Indonesian Chamber of Commerce and Industry (KADIN) show that the country's nickel ore export value surged from $1.1 billion in 2014 to $20.9 billion in 2021, a period that preceded the implementation of the nickel ore export ban.

SMM believes that this policy may find it difficult to have a fundamental impact on the nickel industry in the short term, for the following reasons:

For Indonesia, according to SMM statistics, in 2024, the production of nickel products in Indonesia consumed over 245 million wet metric tons (wmt) of laterite nickel ore. In contrast, the Philippines exported 10.35 million wmt of nickel ore to Indonesia, accounting for only 4.3% of Indonesia's total nickel ore demand. Indonesia imports nickel ore from the Philippines primarily to meet the demand for adjusting impurities such as silicon and magnesium in the smelting process. If the Philippines implements a ban on nickel ore mining, it is also unlikely to have a fundamental impact on the supply and demand structure of nickel ore in Indonesia.

For the Philippines itself, implementing a ban on nickel ore mining remains fraught with difficulties. Even if the policy is officially signed into law, it will not take effect until five years later. The short-term impact on the nickel market is more likely to stem from sentiment rather than structural changes.

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