According to Manny Samson, chief financial officer of Nickel Asia Corp., the Philippines is not capable of completely meeting the demands for nickel coming from China. The Philippines, despite being the world's largest nickel ore producer, is now having a supply problem as stockpiled volumes in China start showing signs of exhaustion.
The output for China's nickel pig iron, which is used as a lower-quality substitute to refined nickel, will be consumed by various steel companies in the country before the year ends. Inventories may fall by about 30 percent when the country becomes solely dependent on Philippine supply, a scenario that would force Chinese consumers to tap other suppliers outside the Asia-Pacific region.
"NPI producers would be completely reliant on Philippine ore after stockpiles of Indonesia[n] ore run out. Chinese stainless steel producers will now have to source nickel elsewhere," Samson told Bloomberg.
China's inventories have already fallen to 120,000 tons of pure nickel since March from about 194,000 tons at the start of 2014. According to Beijing Antaike Information Development Co. analyst Celia Wang, the remaining stockpiles of nickel ore (including refined nickel and ferro-nickel) may run out in three months. She also said that it will introduce a severe problem to the country's stainless steel production.
This is good news for nickel investors as this could intensify the supposed repercussions of the supply deficit brought about by the unprocessed mineral prohibition in Indonesia. The narrowing number of supplies could pull global prices up to $16,000 a metric ton on the London Metal Exchange (LME) and may take prices off continuous bear market rallies.
Tightening supplies could also benefit newcomers like Amur Minerals Corporation (OTC:AMMCF), a Russia-based mining firm that has recently obtained pre-production license from the government. Its projected 90 million tons of nickel production could help meet the growing demand from China, as well as from other emerging countries currently having problems with obtaining high-grade supplies to support their expanding economies.
"Any time between the third and fourth quarter, we'll see the stockpiles being fully depleted. That would be a strong catalyst for prices to recover," Samson added.
Currently, nickel accounts for 58.05 percent of the country's total mineral production, followed by gold at 23.97 percent and copper at 16.55 percent, while silver, chromite and iron comprise the remaining 1.42 percent. Nonetheless, experts say that the country's nickel production remained impressive despite supply glut issues.
"Direct shipping nickel ore and mixed nickel-cobalt sulfide have dominated the production scene for three years in a row. The upbeat performance of nickel was due to the entrance of new players, increased mine output and growing demand abroad," Philippine Mines and Geosciences Bureau (MGB) director Leo Jasareno said