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PrintAs China's struggling stainless steel producers rush to cut costs in the face of easing demand, the Philippines' Nickel Asia Corp. is seeing increasing volumes as a low-cost producer of ore for nickel pig iron.
Nickel Asia, whose shares are a standout in the resources sector with a 37 percent rise so far this year, is one of the world's lowest cost producers of nickel laterite ore, found predominantly in the Philippines and Indonesia.
"Volumes are still good and volumes are increasing. We are still operating at a profit because our costs are generally low," Dennis Zamora, Senior Vice President for Marketing & Strategic Planning, said in an interview late on Friday.
Nickel Asia's ore is shipped mainly to China customers, including the biggest listed steelmaker Baosteel, where it is mostly used to produce nickel pig iron, a low grade ferro-nickel used in stainless steel production.
Increased use of cheaper nickel pig iron has put pressure on nickel prices, which have fallen about 15 percent so far this year after declining for the past two years.
However, appetite for both nickel pig iron and nickel is expected to fall in the next three months as China's stainless steel mills slow production due to reduced demand over summer.
"You can't shield yourself from the market conditions. We are affected by the LME price. As long as we are operating at a profit, we don't intend to change our shipment strategy," Zamora said.
He said market forecasts generally indicated a surplus of nickel in the market over the next 2-3 years, which would reduce the advantage of nickel pig iron, but he expected nickel deficits to appear from 2015 or 2016.
At the same time, Indonesia has announced plans to restrict unprocessed mineral exports from January 2014, which could boost demand for product from the Philippines.
MayBank analyst Ramon Adviento said Nickel Asia has benefitted from quality deposits near port facilities, while a partnership with Japan's Sumitomo Metal Mining Co Ltd has ensured good recovery rates using modern processing technology.
Many of its rivals in the Philippines have to contend with lower ore grades or outdated technology, while its Indonesian rivals, situated a few more sailing days from China, face costlier freight charges.
The Philippines' top producer of the low cost ore, Zamora said the company -- capitalised at $1.03 billion -- was on track to produce 13 million wet metric tonnes (WMT) of ore this year up from around 11.7 million WMT last year.
Its average cash cost per tonne last year was $12.60, against an average price per tonne of around $24.40 for ore sold to Chinese customers, he said.
Nickel Asia is building a second processing plant in Taganito which is set to come on line around October, in which it holds a 22.5 percent stake alongside Sumitomo and Mitsui & Co Ltd
The company is also exploring commercial production of a rare earth metal, scandium, used by the aerospace industry
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