FOCUS - Nickel market still uncovinced by Philippines mining crackdown

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Ewa Mantheyewa.manthey@fastmarkets.comCorrespondent+44 (0) 20 7337 2146

London 25/07/2016 - Nickel market participants continue to downplay the long-term effect of mining developments in the Philippines even after a sixth nickel miner was ordered to stop production.

According to local reports on Friday, the goverment ordered Citinickel in Palawan to halt work at two of its operations due to alleged environmental violations.

And although the nickel price remains not far from nine-month highs - three-month metal on the LME recently traded at $10,495, up $85 on the previous close and having rebounded from sub-$8,000 levesl earlier this year - market obervers continue to pour cold water on the rally.

"There is fund money being put to work on nickel," a category one member said. "Funds like a bullish narrative and spec for a metal that is so 'cheap'. But it's buying on future hopes rather than any shortage of refined metal anywhere. We are not talking about a genuine, justified bull market yet."

Several of the mines were closed before an audit of the country's mining sector started and have not exported nickel ore to China over the past year, Shanghai Metals Market said, while other market sources noted that they are small in scale.

"We expect larger Filipino miners to be unaffected by the current environmental audit of the Filipino mining sector," Citi's Tracy Xian Liao also noted.

The Philippines Chamber of Mines told FastMarkets in an interview that concerns about domestic mining industry are "overblown".

Nickel prices will find it hard to continue higher given the huge stockpile of metal and further supply curtailments are needed to reflect true tightness in the global nickel market. According to Citi, off-exchange metal of an estimated one million tonnes is likely to cap prices in the mid-term.

"It seems the market is overestimating the potential impact on nickel supply the situation in the Philippines," another trader said. "There is still a lot of material lying around and off-exchange volumes remain high."

The International Nickel Study Group (INSG) sees the refined nickel market in only a small deficit of 7,100 tonnes in the first four months of the year.

(Additional reporting by Vivian Teo, editing by Mark Shaw)
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