Global Demand for Nickel or Destruction of the Philippine mountains?

Mining heavily destroyed the paradise Philippines, President Rodrigo Duterte planned on closing all mining in the Philippines. Philippines as world’s largest supplier of nickel; how to suffice the global demand of Nickel if the Philippines would closing down? Photo: ndfp.org

Nickel Falls Most in Eight Weeks on Philippines Supply Outlook

Nickel fell the most in eight weeks on speculation that the government may take longer than expected to close mines that don’t meet environmental rules in the Philippines, the biggest supplier of ore to China.

The metal used in stainless steel advanced 12 percent last month on concern that shipments from the Philippines to China will be disrupted as a new government enforces standards. While Environment Secretary Gina Lopez said an audit of mining operations will be completed in three to four weeks, speculation mounted on the timing of any closures.

“Now doubts have arisen as to whether those mines in the Philippines that are failing to meet the necessary environmental standards could really be shut down in the near future,” Commerzbank AG analysts including Daniel Briesemann said in a note.

Nickel for delivery in three months slipped 4.8 percent to settle at $9,705 a metric ton at 5:52 p.m. on the London Metal Exchange, the biggest loss since May 9.

‘Take Time’

“It will take time for the Philippines to eventually shut the mines and cut supplies,” Jia Zheng, a metal trader with Soochow Futures Co., said by phone from Shanghai. “Ultimately, China can diversify by purchasing from regions like Africa.”

Copper for delivery in three months slipped 1.6 percent in London. Zinc, lead and tin also declined on the LME, while aluminum rose.

A gauge of 18 global base metal producers tracked by Bloomberg Intelligence declined 3.9 percent, the first loss in more than a week. Phoenix-based Freeport-McMoRan Inc. led declines, slipping 8 percent. — With assistance by Luzi-Ann Javier, Winnie Zhu, and Kevin Crowley : Bloomberg

Can You Spare a Nickel, Mr. Duterte?

Nickel has been the worst performer of the London Metal Exchange's six major metals over the past year. The key ingredient in stainless steel, which topped $50,000 a metric ton in 2007, has barely risen above $10,000 in eight months.Between 60 percent and 70 percent of producers are losing money at current prices, Ivan Glasenberg, chief executive of the fourth-biggest producer, Glencore, told an investor call in December.

WINNERS AND LOSERS

In trying to deal a blow to a mining industry he accuses of "spoiling the land," Philippine President Rodrigo Duterte, also known as the "Punisher," may have just done global producers a favor.SHARE OF NICKEL PRODUCERS LOSING MONEY60-70%Nickel traded on the LME rose at the fastest pace in more than eight months Monday. The proximate cause was Duterte's new environment and natural resources minister, Gina Lopez, who said miners that don't pass an environmental audit to be completed in three to four weeks face suspension. Less than a third currently meet international standards, Lopez said last week.

Not a Nickel to Spare

The Philippines is by far the biggest producer of the stainless steel alloy. 2015 mine output by country.

The news isn't exactly a bolt from the blue. Duterte has been a longstanding critic of mining companies, passing a law to enforce a ban on them in his home city of Davao while he was mayor. It moved the market because the Philippines is far and away the biggest producer of mined nickel, according to the U.S. Geological Survey, overtaking Indonesia since that country banned exports of metal ores in an attempt to encourage a local smelting industry.The Philippine nickel industry is dominated by small-scale local producers, so Lopez's comments will if anything give global mining companies a long-overdue reason to be cheerful.

More Losses Than Profits

Vale's nickel unit has recorded an aggregate $2.1 billion of losses over the past decade

Vale, the biggest miner, has posted an aggregate $2.1 billion in losses on its nickel unit over the past decade. BHP's Nickel West operation, the third-biggest producer according to Bloomberg Intelligence data, is still operating largely because the costs of closure are greater than the losses that may be incurred from keeping it running, Chief Executive Officer Andrew Mackenzie told an investor call in February.

Coming Up Short

The global nickel market is forecast to head into deficit this year

It's going to take a lot to lift nickel prices from the doldrums, but a shutdown in the Philippines could be just the ticket. The International Nickel Study Group is already forecasting that demand will exceed supply in 2016 for the first time in five years, by 49,000 tons or 2.5 percent of consumption. While the Philippines may be unlikely to close two-thirds of its nickel mines, modeling a production drop on that scale is a useful thought experiment. With 350,000 tons of output quitting the market, supply would be left 21 percent short of demand. That would be more than enough to put a fire under prices. By David Fickling - Bloomberg.

To contact the author of this story: David Fickling in Sydney at dfickling@bloomberg.netTo contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.net

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Philippine Economy Signs Point to Continue under President Duterte Administration

Bonifacio Global City C3 Block, Taguig City, Metro Manila, Philippines. Bonifacio Global City has been expanded to include this new block as the high end part of the area. This are contains some restaurants as well as some well known high-end brands of clothing and accessories. This block also features the new Dolby Atom and 4-D cinemas. Photo:ryancapulong.com

Signs point to continued growth under Duterte

President Rodrigo Duterte and former President Benigno Aquino present a study in contrasts in leadership styles. The question is whether the differences in personality will affect the politics, policies and, ultimately, the economic performance of the Philippines.

The new government will be formulating its economic and fiscal strategies against a favorable economic and fiscal backdrop. Average real gross domestic product growth since Aquino took office in mid-2010 has been higher than in any previous administration since the 1986 "People Power" revolution. During the January-March quarter of 2016, national government debt fell to its lowest level as a share of GDP since 1997.

These favorable factors led to the Philippines' sovereign credit rating rising by four notches to Baa2 from Ba3 during Aquino's six-year term. Notably, the country's rating went to investment-grade for the first time in 2013.

STAYING THE COURSE

Duterte's party has outlined a 10-point economic agenda that underscores broad policy continuity. The agenda's primary emphasis is on maintaining current macroeconomic policies, and also builds on the key themes emphasized by the Aquino administration, such as ensuring the attractiveness of the Philippines to foreign investors, enhancing tax administration and accelerating infrastructure development.

In line with the anti-establishment bent of his electoral campaign, Duterte has also emphasized that he will focus on more inclusive growth, as seen by his agenda's inclusion of more support for agriculture and education, and the expansion of transfers to low-income households.

The most radical departure that Duterte has indicated he would make from Aquino's economic policy is his willingness to liberalize foreign investment restrictions via changes to the 1987 Constitution. Limits in this area have contributed to the Philippines' low levels of foreign direct investment relative to other countries. The easing of ownership restrictions could significantly support medium-term economic growth.

The credit implications of any future policies for the country will only become apparent over the coming months. In particular, the new government has signaled its willingness to tolerate wider fiscal deficits to accommodate more spending. However, this would entail stepping up public spending -- a departure from the persistent underspending that has contributed to narrow fiscal deficits for much of the past six years.

Indeed, between 2010 and 2015, the Philippines recorded one of the narrowest deficits among emerging countries in the Association of Southeast Asian Nations. In fact, the Philippines was the only country in the bloc to record a fall in general government debt as a share of GDP over that time.

Notwithstanding the impact of any imminent shifts in fiscal policy, growth should remain robust through at least the next two years, and the Philippine central bank will likely maintain its focus on sustaining macroeconomic and financial stability.

Unlike many other more commodity-dependent emerging markets, the Philippines has not experienced a negative terms of trade shock from the turn in commodity prices since 2014. Also, lower prices for energy and food imports have stimulated private consumption, which reached a multiyear high in 2015.

At the same time, rapidly growing services exports and healthy domestic demand have proved resilient to negative spillover from the slowing of the Chinese economy.

POLITICAL RISK

When it comes to sovereign credit ratings, credit analysts have to deal with the assessment of political stability.

As for whether a government under Duterte will be stable, his clear victory in the May election is comparable to Aquino's 15.8-percentage-point advantage during the 2010 polls, and is supportive of political stability. Moreover, a majority of legislators in the House of Representatives are said to align themselves with Duterte, further bolstering the prospects of reform.

The margins of victory in 2010 and 2016 stand in contrast to the 3.5-percentage-point win by Gloria Macapagal Arroyo in the 2004 presidential vote. Combined with subsequent allegations of cheating, Arroyo's narrow margin contributed to recurring challenges to her electoral legitimacy, including attempted coups, impeachment complaints and a mass resignation of cabinet secretaries in 2005.

The Arroyo administration was marked by declining scores in the World Bank's Worldwide Governance Indicators, including those for political stability and the absence of violence, control of corruption and rule of law.

The WGI provide some useful angles to assess the quality of governance across a wide set of countries according to six dimensions: voice and accountability; political stability and absence of violence; government effectiveness; regulatory quality; rule of law; and control of corruption.

These indicators have generally improved since 2010, reflecting the Aquino administration's emphasis on good governance. Over the past few years, policymaking -- such as the budgetary process -- has become more transparent and predictable. The government has also worked toward deregulation to enhance ease of doing business.

The introduction of a competition law has also helped to level the playing field in the private sector. This situation has in turn contributed to stronger investor confidence and economic performance, as well as higher credit ratings.

Duterte's campaign emphasized law and order issues, and burnished the mayor's reputation for being tough on crime and corruption -- a stance somewhat aligned with the "straight path" that Aquino has espoused. However, the new president's comments promoting an extrajudicial approach to addressing crime, for instance, have attracted widespread criticism and could weigh on such elements of governance as the rule of law, political stability and the absence of violence.

We will soon find out whether Duterte's more controversial pronouncements on the campaign trail will translate into actual policy, and if the improving trend in governance will continue. – Nikkei Asia Review

Christian de Guzman is a vice president and senior credit officer for Moody's Investors Service.

 

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Philippines basketball put a scare into France in Olympics qualifying opener, but fall short

The Philippines' Andray Blache attempts a shot against France in their Olympic qualifying contest on tuesday night. Bullit Marquez / AP Photo / July 5, 2016

The Philippines national basketball team brought a tough challenge to France on Tuesday night in their Olympic basketball qualifying opener, but ultimately fell short 93-84 against a well-stocked side featuring NBA stars like Tony Parker and Boris Diaw.

The Gilas Pilipinas went into half-time down merely two, on the strength of strong three-point shooting and the active inside presence of naturalised player Andray Blatche. Despite flurries they could not mount a meaningful comeback in the second half after France pulled away in the third quarter.

The Philippines were aggressive early, with shotmakers like Terrence Romeo heaving audaciously as, playing on home court in Manila, they were undeterred by the prospect of a French side ranked fifth in the world by Fiba.

The Philippines are hosting one of three Olympic qualifying mini tournaments to determine the final three places in Rio. Six teams at each of the three venues are divided into three-team groups from which they will be seeded into the semi-final stages. Only the winner at each site will qualify for the Olympics.

The Philippines will get a chance to keep their hopes alive when they play New Zealand next. Canada, Turkey and Senegal lie on the other side of the bracket, with Canada defeating the Turkish team 77-69 in their opener on Tuesday night as well. The other two tournaments are in Belgrade, Serbia and Turin, Italy.

In their loss, the Philippines struggled to contain San Antonio Spurs guard Parker, who finished with 21 points.

They showed they could go long stretches with France shot-for-shot, however. They made 11-of-28 three-point attempts, good for a solid 39.3 percentage. Romeo had 19 points on 5-of-14 shooting. Stalwart point guard Jayson Castro had 14 points and three assists, and former NBA big man Blatche added 21 points and eight rebounds.

The French, though, also led by CSKA Moscow’s Nando de Colo scoring 27 points and Diaw’s nine-point, nine-rebound effort, went on a 14-4 run in the middle of the third quarter that the Filipinos simply never really recovered from.

Troy Rosario, Castro and Gabe Norwood hit shots in succession as the fourth quarter wound down to get the Philippines back within four, but Diaw and Kim Tillie overwhelmed them inside late.

The Gilas will try their hand again on Wendesday night at 5pm UAE time (9pm local Manila time) against the New Zealanders.

Tony Parker: We had to dig deep to beat the Philippines

French national basketball team bested Gilas Pilipinas 93-84 in their first game at the FIBA Olympic Qualifying Tournament (OQT), but it definitely wasn’t the demolition job that some expected before the game. Photo: CNN

The French national basketball team bested Gilas Pilipinas 93-84 in their first game at the FIBA Olympic Qualifying Tournament (OQT), but it definitely wasn’t the demolition job that some expected before the game.

After the game, NBA guard Tony Parker only had good things to say about the Philippine team.

“I want to congratulate the Philippines. They had a great game, they were on fire in the first half,” said Parker. “You have to give a lot of credit to them, you can be proud about the team. They played a great game.”

“They made it tough on us, and we had to dig deep to get the W,” Parker added.

“They were pretty good, they were very aggressive,” said Parker on his counterparts. “They were very aggressive going to the basket and creating shots for their teammates.” – The National / CNN

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