Singapore 28/09/2016 - The Philippines may have published its damning mining audit results on Tuesday but more clarification is needed before the impact on the nickel market can be established.
The Philippines' Department of Environment and Natural Resources (DENR) has ordered another 20 more mines to be suspended. Should those 20 be eventually halted, it will bring total closures to 30.
Of those 30, 18 are nickel producers that account for 55.5 percent of domestic nickel ore output based on last year's production, the DENR said.
Filipino authorities require the targeted 20 to show why their operations should not be suspended. For now, though, several - including Nickel Asia's Hinatuan Mining Corp - have said they continue to operate because they have not received stop orders.
It could take another month before it is clear how many miners will actually be suspended and how production will be affected, based on a statement from Canada-based miner B2Gold Corp.
DENR officials told the company that its Masbate gold project in the Philippines will receive a show-cause order due to audit. This show-cause order will be delivered within two weeks, B2Gold said; it will then have another week to address the issues, after which the government will take a fourth week to consider the company's responses.
The severity of the violations by the 20 miners is also unknown. B2Gold, for one, said it understands that the DENR findings do not involve any environmental or social issues but only administrative issues.
Some, such as B2Gold and Oceanagold, insist their projects have always complied with environmental regulations and they do not expect disruptions.
How the miners facing suspension react in the coming weeks will be closely watched.
"The Philippines' environmental minister will still carry out talks with the miners, so there remain variables when it comes to the actual shutdown of mines," China's Galaxy Futures said in a Tuesday report
SHORT-TERM SUPPORT
Now the audit results have been made public, most expect support for nickel prices in the near term - if the miners fail to convince authorities of their good environmental behaviour, more production cuts look inevitable.
LME nickel surged to a seven-week high of $10,875 on Tuesday and recently traded at $10,660 per tonne on Wednesday, up $30 on Tuesday's close.
But it has not taken out its 2016 high of $11,030 set on August 10, suggesting the audit results were priced in. After all, did anyone really expect the DENR to give a clean bill of health to miners?
And in any case, most major nickel producers in the country - including Nickel Asia's Taganito, Rio Tuba and Cagdianao operations - have largely escaped unscathed.
The estimate that more than half of domestic nickel production will be affected should all 18 nickel producers be halted sounds big and scary but remember: this includes eight that had already been suspended before the results were out.
When the market realised that any supply disruptions would be limited, nickel prices slipped in August. So why the view that nickel prices could remain supported in the near term? For a start, stronger-than-expected stainless steel production in China over the rest of the year should play a bigger part than a short-term disruption to nickel ore supply.
But uncertainties remain - whether the US will raise rates before the end of the year and the outcome of the presidential election there, for example.
More specifically for nickel are developments in Indonesia. Just as a restart of Glencore's shuttered zinc operations is seen as a time bomb for zinc prices, a possible relaxation of Indonesia's export ore ban threatens to explode nickel prices.
With no official word here yet, opinions are mixed. Some believe an easing could come as soon as 2017 but others said a relaxation is unlikely because doing so would defeat the purpose of the ban, which was to encourage downstream processing.
The market will be keenly awaiting news from the Philippines and Indonesia for the next major swing in prices - either higher or lower.
(Editing by Mark Shaw)