ASX-listed nickel miners have soared again in trading so far today, after the Philippines passed a bill designed to stop the export of unprocessed ore from the country, including nickel.
While the bill has only passed the lower house of the government, it seems it's only a matter of time before the bill becomes law.
Like Indonesia before it, the Philippines is trying to capture more of the value of its minerals, by demanding that the ore is processed onshore before being exported. It also creates jobs for locals and the country gets to share in higher tax revenues from higher value processed ore.
The good news for Australian nickel miners is that that decision has pushed the nickel price sky high – above US$19,000 per tonne.
No wonder miners like Independence Group NL (ASX: IGO), Western Areas Ltd (ASX: WSA), Panoramic Resources Ltd (ASX: PAN), Poseidon Nickel Ltd (ASX: POS) and Sirius Resources Ltd (ASX: SIR) are all higher today. Since the beginning of the year, all five stocks have soared – Panoramic is up 240%, Poseidon 175%, Western Areas 126%, and Independence and Sirius are up 58% and 87% respectively.
The risk for investors is that the restrictions on exporting unprocessed ore in Indonesia and the Philippines could easily be reversed, likely resulting in a falling nickel price. But if both countries manage to capture more revenues through taxes and royalties from exports of processed ore, then the laws are likely to stay.
That would be good news for the nickel miners.
Another risk that appears to have been overlooked is that China may cut back its steel production. Nickel's main use is in the production of some stainless steel and falling steel production could curb the demand for nickel.
However, speculating on the whims of where commodity prices may or may not go is exactly that – speculating. While the gains so far have been fabulous, factors that drive the prices down rapidly could come from any corner – with the companies having little control over them.
If you are worried you've missed the boat, don't be. There are plenty more fish in the sea and ways to make $1 million in the market. To find out more, you might want to check out this free report.
