2016 REVIEW: China’s imports of Philippine laterite ore hit in a year dominated by DENR mine audit

The Philippine mining audit, adverse weather conditions and low nickel prices have all led to reduced laterite ore exports to China and encouraged Chinese nickel producers to seek other ways to replenish nickel ore stocks this year.

December 22, 2016

China produced about 290,000 tonnes of nickel metal in 2016 from laterite ore imported from the Philippines, compared with an estimated 355,000 tonnes of nickel metal in 2015, Yang qin, vp of Beijing Dinghejintong Economy and Trade Co, one of China’s top nickel ore trading companies, said at a nickel and stainless steel forum in Beijing in mid-December.

Chinese nickel ore market participants agree with Yan’s data, which equates to an 18% year-on-year fall in nickel metal output from Philippine laterite ore. Chinese nickel ore importers and shipment agencies resident in the Philippines’ nickel ore export ports count shipments independently to verify nickel ore export data.

The Philippines is estimated to export 42.24 million tonnes of nickel ore to China in 2016, according to statistics by Bejing Dinghejintong Economy and Trade Co.

High-grade nickel ore (nickel content above 1.8%) is estimated to account for 1.34 million tonnes, making up 3.17% of total exports, according to Dinghejintong’s data.

China received an estimated 22.14 million tonnes of middle-grade nickel ore (1.3-1.7% nickel content), accounting for 52.14% of total Philippine exports, according to the data.

Meanwhile, low-grade nickel ore (0.6-1.2% nickel content) to China is estimated to account for 18.76 million tonnes, or 44.41% of exports, according to the data.

High-grade laterite ore exports from the Philippines to China have fallen by 6 million tonnes on an annual comparison; middle-grade laterite ore is almost level with 2015’s level for low-grade, Yan said.

Impact factors
Rainy weather, a low nickel price and the Philippines’ mining audit in 2016 are the three main reasons for the lower exports to China.

The Philippines saw the worst weather this year since China started importing laterite ore in 2006, according to laterite ore importers.

Consistent rainy weather means it takes much longer to dig up laterite ore, and makes it harder to load ores at ports in the Philippines as well as to deliver cargoes to China, a major laterite ore importer told Metal Bulletin.

“After at least a month’s delay in nickel ore loading, we were still trying to complete the task in July which should have finished in the first half of 2016,” the importer added.

Besides the bad weather, underperforming nickel prices in the first half of 2016 also weighed on the Philippines’ nickel ore exports.

The London Metal Exchange three-month nickel price touched multi-years low of $7,550 per tonne on Tuesday February 9, and prices continued to be depressed by high global nickel inventory in the first half of 2016.

Laterite ore with 1.5% nickel content, cif China, was assessed at $23-24 per tonne on March 22, 2016, the lowest since Metal Bulletin began recording 1.5% nickel content laterite ore prices.

When the 1.5% nickel content laterite ore price was below $25 per tonne, miners were not willing to dig material out to sell, another laterite ore importer said.

Another driver of reduced Philippine ore exports in 2016 is the Philippines’ mining audit which started on July 8.

In early July 2016, the Philippine president officially ordered an audit of all operating mines and a suspension on new mining projects through a statement made by the department of environment and natural resources (DENR), which was planned to last for one month.

Some bans have been imposed by the DENR, headed by populist President Duterte’s hardline minister of the environment, Regina Lopez.

Then on Tuesday December 13, Lopez said a separate review from an environmental audit of the country’s 41 mines was completed in August and the full results of it would be released in January.

The pending audit results on laterite ore mines and stricter environmental protection requirements by the Philippines’ government will unquestionably continue to put pressure on Philippine laterite ore exports.

The Palawan and the Zambales districts of the Philippines are hubs of nickel ore exports between October and March, when Surigao district is affected by the rainy season, a source familiar with the Philippines said.

However, Palawan and Zambales districts will face strict environmental audits, which will cast shadows on nickel ore exports in the first quarter of 2017, the source added.

Laterite ore prices pushed higher
Already tight laterite ore supply from the Philippines will not ease until April next year, pushing up prices of the nickel raw material, Shi Zhendong, chairman of Global Ferronickel Holding Inc, said at a nickel and chrome forum in China’s Tongxiang city on November 11.

The prices of 1.5% and 1.8% nickel-content nickel ore have continued to rise on very tight supply in the seaborne market, due to the Philippines’ rainy season, as well as low inventory in Chinese ports, Metal Bulletin has learned.

Metal Bulletin assessed laterite ore 1.5% nickel content cif China at $48-52 per tonne on Tuesday December 13, its highest price in 2016, and more than double its lowest price on March 22.

The 1.8% nickel-content laterite ore price cif China was assessed at $64-66 per tonne on the same day, also at its highest in the year and much higher than $39-43 per tonne on March 22.

Chinese nickel pig iron producers as well as laterite ore traders have started seek other channels to replenish the shortage of laterite ore.

Background: Chinese laterite ore customs data
In the January-October 2016 period, China imported a total of 27.12 million tonnes of nickel ore, down 11.95% year-on-year according to Chinese customs data.

China’s nickel ore imports from the Philippines came to 26.19 million tonnes in the first ten months of the year, down 12.58% year-on-year.

After Indonesia implemented a ban on nickel ore exports, the Philippines has become the main source of Chinese nickel ore – Chinese imports of ores from the Philippines accounted for 97% of total imports in 2015 and 2016.

However, Chinese customs data has been known to confuse wet tonnes with dry tonnes when counting laterite ore imports, causing frequent delays in customs clearance which affects how markets participants observe nickel ore import volumes. This has prompted some Chinese laterite ore importers and shipping agencies to calculate import statistics themselves to monitor the laterite ore market more clearly and closely.