US, Philippines Seek Partnership to Reduce China’s Nickel Dominance

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(Bloomberg) — The U.S. and the Philippines are discussing how to stop China from dominating nickel processing in the Southeast Asian country, a key supplier of the metal crucial to electric vehicle batteries.

One measure currently under consideration is a trilateral agreement through which the Philippines would supply raw nickel material, the United States would provide financing, and a third country such as Japan, South Korea or Australia would provide the technology necessary for smelting and refining, say people familiar with the matter.

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Talks with the Philippines – the world’s second-largest nickel producer – are still at an early stage, with key elements of a potential deal still to be worked out, including whether the U.S. can provide financing, the people said, requesting anonymity asked to discuss private consultations.

The Philippine government did not immediately respond to a request for comment on Wednesday, a holiday in the country. White House spokespeople did not immediately respond to requests for comment.

The discussions come amid growing concerns in Washington about China’s dominant position in nickel processing in Indonesia, the main supplier of the critical mineral. Primary demand for the metal, traditionally used to make stainless steel, is expected to rise by about a third to 4.4 million tons per year by 2030, according to BloombergNEF.

U.S. officials say nickel is critical to President Joe Biden’s push for a green energy transition, and the potential partnership is among measures sought to reduce dependence on critical minerals produced in China. BNEF predicts that lithium-ion batteries will account for about 28% of nickel demand by the end of the decade.

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Read more: From green hype to bailouts, the nickel industry has imploded

The talks also come at a time when the global nickel market has been plunged into chaos following a flood of new shipments from Indonesia – the result of huge Chinese investment and major technological breakthroughs. Across the world, mines are at risk of closing while others seek government bailouts or go bankrupt.

The scale of the collapse has led some in the industry to question whether there is a future for most mines outside Indonesia, while China’s dominance of the country’s processing sector also raises concerns about supply reliability.

The Philippines plans to expand nickel mining despite the global surplus, and less than 3% of the 9 million hectares (22.2 million acres) of land classified by the government as rich in mineral reserves is currently being mined.

Miners in the Philippines are being pushed to invest in processing facilities that can deliver higher-value products rather than just shipping out raw metal ore. There are currently only two nickel processing plants, both operated by Nickel Asia Corp. which is partly owned by the Japanese Sumitomo Metal Mining Co.

The country has considered following Indonesia and taxing its nickel ore exports to attract investment in processing plants.

—With assistance from Manolo Serapio Jr.

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