Seasonal rains are set to disrupt nickel mining in the Philippines for the next four months or so, crimping exports to top buyer China and stoking a shortfall in the global supply of ore.
Miners in the Philippines say they will be able to fulfil their 2014 contracts as they have factored in the impact of the annual monsoon.
But with a ban on raw metal shipments by former top exporter Indonesia, the seasonal decline in the Philippines’ output could force China’s stainless steel industry to run down its stocks of nickel ore, reigniting a rally in nickel prices.
Most producers in the Philippines’ main nickel-mining region of Caraga are expected to close operations as normal from October or November until early next year in anticipation of heavy rains.
The Philippines has emerged as the top supplier to China’s producers of nickel pig iron, a key ingredient in stainless steel.
“[China nickel pig iron makers] are definitely going to be caught short,” said Daniel Hynes, analyst at ANZ in Sydney. “Obviously, they’ll just have to dig into their inventory to meet demand in the shorter term or look at importing some ferronickel from various sources.”