Nickel prices have traded sideways in the short term after peaking in January. Downside risks may increase as the price has not yet rebounded enough to confirm an uptrend. Meanwhile, volume levels are partially responsible for the current stainless and nickel price action. Overall, buyer numbers have continued to decline since January. Now, the rally is running out of steam, and the market is volatile enough that nickel prices have no clear market direction.

Stainless steel inventories at service centers, distributors, and end users remain high. Some service centers reported having nearly five months’ supply on hand. Therefore, stainless steel buyers may still be able to make speculative purchases. On the other hand, imports of licensed cold-rolled stainless steel to the United States will decline from July 2022 onwards. Of course, the U.S. cold-rolled market requires some imports. After all, the current U.S. flat rolling production is not enough to meet the demand. Fortunately, import licenses have increased to over 21,000 metric tons in January 2023. However, some products, such as light gauges or ferritic stainless steel, may still be in short supply by the second quarter. Recession fears are making people concerned about placing orders.

Indonesia’s value-added strategy has begun to attract the attention of other metal-rich countries. According to a recent report, the Philippines is the latest country to consider a tax or a complete ban on raw nickel exports. Reports suggest the government is considering a 10% tax on nickel ore exports. The Philippine government is also reportedly considering a 3% royalty on the output of large miners. Like Indonesia, the Philippines aims to attract investment for downstream industries. According to Environment and Natural Resources Minister Yulo Loyzaga, “We want to be part of the supply chain no longer. We want to be part of the value chain.”

Regarding market impact, the tax in the Philippines will support nickel prices, albeit to a lesser extent. It will also tighten nickel supply for the foreseeable future, increasing production costs for downstream industries. However, it may be more of a mid-to-long-term threat. Any such plans would need to be approved and implemented before the market sees any impact. Moreover, it could take years for these industries to become operational if the Philippines attracts the investment it seeks. It could offset the potential impact if global economic pressures lead to a drop in nickel demand. However, the pressures could also test the country’s resolve to continue imposing taxes or bans. If the Philippines continues the policy, China will bear the brunt, followed by Japan. China currently accounts for about 90 percent of Philippine nickel exports.

It’s worth noting that such considerations have faced backlash, which could still derail the administration’s plans. The biggest critics of the move include the Philippines’ mining sector. “The initial proposal in the House was 10 percent. That would kill the industry,” Dante Bravo, president of Philippine Nickel and Global Ferronickel Holdings, told Reuters recently. Other critics point out that the comparison between Indonesia and the Philippines is flawed. Indonesia accounts for 48% of global supply, while the Philippines accounts for just 11%. According to the U.S. Geological Survey (USGS), the Philippines will be the second-largest producer in 2022. Despite this, its production is still significantly lower than that of Indonesia. Indonesia is estimated to produce 1.6 million tonnes of nickel in 2022. In the same year, the Philippines produced only 330,000 tons. In addition, ore supplied by the Philippines is reported to be of lower quality than that from Indonesia. Considering its reserves, the Philippines is at an even greater disadvantage. While it remains the world’s second-largest supplier, the Philippines has only the sixth-largest reserves. That fact alone may cause potential investors to hesitate.

At this point, a Philippine tax or outright ban is no guarantee. However, these considerations do raise an interesting hypothesis. Will other countries follow suit? What about companies with larger market shares? For example, Chile and Peru are the world’s largest and second-largest copper producers. Moreover, both countries have repeatedly attempted to impose royalties on their mining industries recently. Beyond that, estimates point to a severe deficit in copper supply over the next few years, partly due to growing demand. Predictions like these could inspire countries to adopt Indonesia-style value-adding strategies. However, if this becomes a reality and other countries look to replicate Indonesia’s success, it will inevitably reshape global market dynamics.

Chinese ferromolybdenum lump prices continued to soar, rising 40.32% to $58,328 per metric ton as of Feb. 1. South Korean 430 cold rolled 2B coil prices rose 14.93% to $1,866 a metric ton. Chinese 316 CRC prices rose 11.58% to $4,878 a metric ton. The Allegheny Ludlum surcharge for 316/316L coil rose 11.14% to $2.35 per pound. Finally, LME primary three-month nickel prices were the only month-on-month decline in the headline index, falling 4.06% to $29,670 per metric ton.