Currently, the Philippines is seeking Western investments to further develop its nickel reserves, challenging the key battery metals supply chain dominated by China, and promoting diversification in the global supply chain.
Deputy Minister of the Department of Trade and Industry of the Philippines, Ceferino S Rodolfo, stated in an interview with the Financial Times that “the Philippines has the potential to become a significant player in the battery manufacturing industry.”
The Philippines is the world’s second-largest nickel producer, with nickel production only a small fraction of Indonesia, the largest nickel producer.
Nickel is a widely used metal with good ductility, corrosion resistance, and magnetic properties widely used in steel, nickel-based alloys, electroplating, batteries, and various military industries such as aircraft and radar, as well as civilian machinery manufacturing and electroplating industries.
According to Benchmark Mineral Intelligence data, Indonesia accounts for 57% of global refined nickel production, which was 4.5 times that of the Philippines in 2023, and is expected to rise to 69% by the end of this decade. Furthermore, Indonesia’s nickel reserves far exceed that of the Philippines. According to data from the U.S. Geological Survey, Indonesia’s nickel reserves are 55 million tons, 11 times that of the Philippines.
However, Indonesian government officials claim that 90% of Indonesia’s nickel industry is controlled by Chinese companies, with Indonesia and China together controlling the nickel supply chain, suppressing the output of other producers with low prices.
Nickel mines in Australia have closed due to falling prices, with nickel prices falling 23% in the past year. Nickel mining in French overseas territory New Caledonia has also been interrupted due to political unrest.
In contrast, Chinese companies are rapidly expanding their mining operations and controlling mineral resources worldwide. The BBC has identified at least 62 mining projects involving Chinese companies aimed at extracting lithium or three other critical metals for green technologies – cobalt, nickel, and manganese.
According to The Wall Street Journal report on July 6, 2023, “as Chinese companies master the once high-difficulty refining process, Indonesia’s vast nickel reserves have opened the door to the electric vehicle industry’s thirst for nickel resources, and China has naturally taken the lead in Indonesia, which has developed into the world’s largest nickel producing country.”
Furthermore, according to Radio Free Asia report on May 23, “China has made large-scale investments in various aspects of critical mineral supply chains and additional investments based on that foundation. For instance, in extracting nickel ores needed for the production of electric vehicle batteries, China has mined nickel ores in large quantities in Indonesia, disrupting the market, while Western competitors are facing difficulties.”
The Philippines’ efforts to expand nickel mining may help break China’s control over the nickel mining supply chain.
Rodolfo stated that countries like the United States, the United Kingdom, Australia, Japan, and South Korea have shown interest in investing in the Philippine nickel industry, along with Chinese companies.
He highlighted that “this is a competition between China and the United States,” but the Philippines “indeed has reasons to choose investors other than China so that we can become a nickel supplier beyond China’s control.”
He also mentioned that the Philippines hopes to sign a key mineral extraction agreement with the United States and provide tax incentives for the U.S. However, an agreement has not been reached yet due to the U.S.’ reluctance to sign such agreements during election years.
Adam Webb, Director of Cathode Products at Benchmark Mineral Intelligence, suggested that financing will be a challenge for the Philippines in the current low-price environment. However, policies such as tax incentives for non-Chinese companies could attract investments to the Philippines, potentially proving to be a viable option for Washington to reduce its nickel supply chain risk.
Webb stated that the Philippines offers an opportunity for Western countries to break away from China-dominated Indonesian nickel industry, reducing the risk of nickel supply being increasingly concentrated in a single country and achieving diversification.
The Philippines is also seeking to join existing agreements between the U.S. and Japan.
Moreover, the Philippines is seeking foreign investments to build more refining plants, aiming to produce “greener” nickel with the help of investors through renewable energy supply to the refineries.
Rodolfo emphasized that unlike Indonesia, which relies heavily on coal-fired power plants, the Philippines is investing in cleaner energy sources and considering integrating hydropower, solar power, wind power, and natural gas.
Currently, there are two nickel processing plants in the Philippines, both operated by Nickel Asia Corp, with Sumitomo Metal Mining of Japan as its largest shareholder.
The Philippines is accelerating efforts to establish closer economic ties with the United States and its allies, especially as tensions between the Philippines and the Chinese government in the South China Sea continue to escalate.
On June 17, a vessel from the Chinese Coast Guard rammed and surrounded a Philippine military resupply vessel, resulting in a Philippine soldier being seriously injured. According to Voice of America, “a Philippine soldier lost a finger in the conflict, and Manila accused the Chinese Coast Guard of looting firearms, damaging inflatable boats, and other equipment.” Philippine Defense Secretary Gilberto Teodoro called it “an aggressive illegal use of force.”
Manila’s Ambassador to the United States, Jose Manuel Romualdez, told the Financial Times that in light of Washington’s concerns over high energy costs, “we need to establish a better, more cohesive, and cheaper energy source.”
He added that Manila is preparing to invest in cheaper and cleaner energy sources, considering combining hydropower, solar power, wind power, and natural gas.
The Philippines’ pursuit of closer ties with the U.S. and its allies, combined with investments in nickel mining and refining, highlights its efforts to reduce dependence on China and promote diversified development.