(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia Oct 4 It's not often that
jobs get exported from the developing world back to a developed
country, but this is likely to be the case with nickel, the
Philippines and Australia.
The new Philippine government of President Rodrigo Duterte
has roiled global nickel markets by suspending 10 nickel mines
and threatening the closure of at least 12 more, citing
The suspended mines and those at risk represent nearly 60
percent of output in the Philippines, the world's largest
producer of nickel ore and top supplier to top buyer China.
It's no surprise that the uncertainty surrounding the
Philippines' nickel output has led to a surge in prices, with
benchmark London futures rising 18.5 percent from the
end of last year to Monday's close of $10,350 a tonne.
But while the global market for nickel is undoubtedly
tighter than it was, the recent rally from February's 13-year
low will serve to boost supply over the longer term.
An example of this is plans to reopen the Avebury mine in
Tasmania, Australia's island state, that was mothballed in 2009
after nickel prices collapsed in the wake of the 2008 global
The mine's owners, Melbourne-based copper and zinc miner MMG
, has agreed to sell Avebury to a private company,
Dundas Mining, which plans to restart operations next year.
Prior to being placed on care-and-maintenance Avebury was
capable of producing 8,500 tonnes a year of nickel concentrate,
and this could be increased to around 15,000 tonnes if mining
operations are expanded.
This makes Avebury a small player in the global nickel
stakes, but the point is that it's unlikely it is the only mine
that may return to being viable if the nickel price has indeed
bottomed and is now on a sustainable recovery path.
If the mine does reopen, it will also be an unusual reversal
of job flows between the developing and developed world.
In recent years, Tasmania, in common with the rest of
Australia and other developed nations, has tended to lose
manufacturing and other semi-skilled jobs to developing nations
that can offer lower taxes and cheaper labour forces.
A recent example in Tasmania was the relocation of part of a
heavy mine equipment factory owned by Caterpillar Inc
from the town of Burnie to Thailand in 2015, with a reported
loss of 280 jobs.
The suspension of nickel mines in the Philippines is perhaps
unusual insofar as it shows a developing nation being prepared
to sacrifice employment in pursuit of better environmental
While there has been some softening of the recent rhetoric
by Philippine Environment and Natural Resources Secretary Regina
Lopez, it's still clear that she intends to ensure miners are
more aware of their environmental responsibilities.
The broader question is will the current question mark over
nickel output in the Philippines, which supplies about a quarter
of the world's mined nickel supply, be enough to drive a rally
in prices that will tempt investment in bringing back supply, as
at Avebury, or lead to new deposits being developed?
It's worth noting that while nickel has performed strongly
this year, it's still barely a fifth of its record high of
$51,800 a tonne, reached in May 2007.
While this does imply plenty of headroom for a sustained
rally, it also implies that sustained tightness is needed in the
market, meaning that new supply shouldn't arrive too quickly or
it will risk stifling the recovery.
It's here where the risks lie, as Indonesia, the former top
supplier of nickel ore, is considering relaxing a 2014 ban on
the export of raw minerals, in what would be a major policy
It's not clear why the government would reverse the ban,
given that Indonesia has had success in encouraging increased
downstream processing of mineral ores, as can be seen by the
massive surge its in its exports of ferronickel to China.
Ferronickel is an intermediate stage product between ore and
refined metal, and China imported 450,874 tonnes of the product
in the first eight months of the year, a jump of 301 percent
over the same period last year.
At the same time, China's imports of nickel ore and
concentrates from the Philippines fell 21.3 percent in the first
eight months of year to 17.99 million tonnes.
It's also possible that the Philippines will impose a ban on
nickel ore exports, travelling down the same path that Indonesia
is now contemplating leaving.
It appears the only certainty for nickel currently is
uncertainty, which may serve to keep prices up while making any
investment decisions from smelters in Indonesia to small mines
in Tasmania a brave call.
(Editing by Richard Pullin)