OFW Filipino Heroes

Wednesday, July 20, 2016

Philippines flips the pig nickel finger at China

Philippine President Rodrigo Duterte has warned that he will cancel mining projects that are causing environmental harm. (AP Photo/Aaron Favila, File)

We are now seeing the first repercussions of the fact that the disputes between China and the Philippines extend beyond the South China Sea — the nickel price is on the rise following nickel mine shutdowns ordered by the Philippine government.

Last night, nickel edged up to a one-year peak of $US4.81 a pound. While last night’s price is a far cry from the heady days when nickel was above $US10 a pound, it still represents a rise of almost 15 per cent from the $US4.20-a-pound level where nickel traded just a month ago.

While the outlook for all the base metals is improving, the shut down of key nickel mines in the Philippines has given a real boost to the nickel market at the expense of China.

The fact that the Philippine government’s shut down orders came a few days before the International Court of Justice ruled in favour of the Philippines over China in their South China Sea dispute is not lost on the nickel market, although, naturally, everyone may deny a connection.

Nevertheless, this is the first of many trade issues that will arise in the South China Sea, which, we should not forget, is the main route used by Japan to gain supplies.

To understand the importance of the Philippine government’s crackdown on nickel ore production we need to go back into the history of the development of pig nickel, which I outlined earlier this year when explaining the source of the woes hitting Clive Palmer’s Townsville nickel refinery (Townsville’s problem is pig nickel not Clive Palmer, April 20).

Nickel was once a boom metal but the Chinese stopped the nickel boom via a product called pig nickel. Pig nickel contains cobalt, zinc, copper etc. but it is good enough to make the stainless steel used in a lot of buildings and handrails plus low-grade kitchen and bathroom equipment.

However, pig nickel is not an acceptable substitute for the stainless steel used in chemical plants, oil refineries and nuclear power plants.

China initially produced pig nickel from nickel ore imported from Indonesia. So, although the production process was cheap and dirty, when the nickel price increased, the Chinese cranked up their pig nickel blast furnaces.

But in 2014, Indonesia stopped exporting nickel lateritic ore, demanding instead that its nickel be turned into metal in Indonesia. The price of nickel boomed as pig nickel plants in China were forced to slash production due to insufficient ore supply.

But then China began sourcing its nickel ore from the Philippines and the nickel price slumped once more as pig nickel hit the market again.

In May, voters in the Philippines elected Rodrigo Duterte President. Duterte went on to appoint Regina Lopez, a staunch environmentalist, as mining minister.

Earlier this month, she ordered the suspension of operations at two nickel ore mines for environmental violations and halted the issuance of exploration permits while she undertook a review of all existing mines as part of a nationwide crackdown on bad mining practices.

The two nickel mines that were suspended were operated by BenguetCorp Nickel Mines Inc and Zambales Diversified Metals Corp,.

Of around 40 metals mines operating in the Philippines, Minister Lopez told Reuters she didn’t “even know of one” that practised responsible mining, strictly adhered to environmental standards or took full care of the local communities where they operated.

And, to back her up, President Rodrigo Duterte warned that he would cancel mining projects that were causing environmental harm.

Take that China.

The Philippines is the biggest nickel ore supplier to China and have the fifth-largest nickel reserves in the world.

Given that the Philippines mining crackdown and the South China Sea ruling all happened within one week in July, it’s still too early to determine how trade will be affected.

Leaving aside the timing of the Philippines crackdown on nickel production, the global nickel industry needs a nickel price approaching $US10 a pound in order to make worthwhile returns.

And given the bad mining practices in the Philippines, it will take a much higher nickel price to justify the extra outlays required to alter approaches to mining. China is in the front line of the countries to be affected. – The Australian

 ROBERT GOTTLIEBSEN - Business Spectator columnist Melbourne @BGottliebsen

 

 

Sunday, July 17, 2016

FORBES: China SENT H-6K NUCLEAR BOMBER to Panatag Scarborough Shoal . can attack any target in the entire territory of the Philippines.- PLA Website Said"

A Chinese H-6K bomber flies over Scarborough Shoal, which the Permanent Court of Arbitration ruled on Tuesday belongs to the Philippines’ exclusive economic zone. The People’s Liberation Army Air Force (PLAAF) released the photo on their Weibo social media account two days after the ruling. PLAAF.

Chinese Bomber Buzzes Philippines' Scarborough Shoal In Latest Salvo Of U.S.-China Signalling War

China released a photo Thursday of a nuclear-capable Chinese bomber flying south near Scarborough Shoal (Panatag Shoal). This is the latest salvo in a signalling war between the U.S. and China over Philippine territory.

In April 2016, the U.S. sent A-10 Thunderbird attack planes over Scarborough. These heavily-armored “Warthogs” are not nuclear-capable planes, but rather designed for close-air support to ground troops. According to the U.S. Air Force, the A-10 missions over Scarborough promoted “transparency and safety of movement in international waters and airspace, representing the U.S. commitment to ally and partner nations and to the Indo-Asia-Pacific region’s continued stability now and for generations to come.” The Chinese H-6K nuclear bomber is a significant escalation in what has become a signalling war over the South China Sea.

The effect of the release on the Weibo social media account belonging to the People’s Liberation Army Air Force (PLAAF) should be interpreted as an attempt to signal to the Philippines and the U.S. that China is serious about its South China Sea claim, as delineated by the 9-dash line. The claim includes Scarborough Shoal, far to the north of most of the occupied islands of the Spratlys and Paracels.

According to retired Captain James Fanell, former Director of Intelligence and Information Operations for U.S. Pacific Fleet,  “My cut is that this flight is indeed a direct and intentional strategic signal that is in keeping with China’s post-PCA [Permanent Court of Arbitration] ruling statements that they neither acknowledge nor accept the court’s verdict.”

The photo release followed quickly after Tuesday’s ruling in the Hague by the Permanent Court of Arbitration. The PCA ruled the 9-dash line illegal according to the United Nations Convention on the Law of the Sea (UNCLOS). China immediately responded to the ruling on Tuesday by calling it “illegal” and “null and void”, and attempted to discredit the Court.

According to Mr. Fannell, “while it may not be unprecedented for a PLAAF H-6K bomber to fly from its bases on the Chinese mainland out towards Scarborough, it is unprecedented to have such a flight advertised by PRC press and to specifically orchestrate the pictures and public message over Scarborough.”

The H-6K bomber (tail number 11097) depicted in the photo is capable of delivering a nuclear-armed cruise missile to all major U.S. military bases in Asia, including Singapore, Guam, and Okinawa. The H-6K is based on the Russian Badger bomber and has a combat range of up to 3,500 km. It can carry six CJ-20 cruise missiles under its wings, plus additional missiles internally. The CJ-20 cruise missiles can travel an additional 1,500 to 2,000 km beyond the H-6K’s combat radius. When fully loaded with ordnance, the bomber’s range decreases slightly.

Mr. Fanell said that the H-6K flight near Scarborough “should be taken as another reminder of the military threat to our U.S. Seventh Fleet and the naval assets of our allies in the region.” The U.S. Seventh Fleet has been based in Singapore, since losing its lease for Subic Bay from the Philippines in late 1991. The Fleet left the Philippines for Singapore in 1992.

Given China’s threats and occupation of islands within Philippines’ EEZ, the Philippines allowed a rotation of “temporary” U.S. forces into Subic Bay in 2015. Scarborough Shoal is only 162 miles from Subic Bay, and so a Chinese air strip at Scarborough would be a major strategic threat to U.S. forces stationed there, and the utility of Subic Bay as a naval base. Chinese maritime and military experts said that China plans to build an airstrip on the shoal in 2016.

The U.S. could reply to the Chinese H-6K flight over Scarborough by executing and publicizing its own nuclear-capable flight over the South China Sea in the near future. The U.S. similarly signalled after China declared an air defense identification zone over the East China Sea in 2013 by flying two nuclear-capable B-52 bombers through the ADIZ. This was widely seen as an invalidation of the ADIZ since the U.S. and Japanese militaries do not officially recognize its existence.

Failure to publicly respond to China’s H-6K flight could be seen by Chinese military planners as backing down on the Scarborough issue, and giving China a subtle green light to start building a military airstrip. Military flights provide strategic signalling that is seen as an escalation over diplomatic statements. Military moves such as the H-6K flight over Scarborough demonstrate resolve on an issue.

Military theory, such as that promulgated by Harvard Professor and Nobel Laureate Thomas Schelling, predicts that the less powerful competitor (in this case China) will back down first when two potential combatants climb a “ladder” of escalation. Dr. Schelling’s theory is known as “escalation dominance”.

But China has not reached that point yet, and is still escalating. The CCG augmented the number of ships at Scarborough since June 12, when two CCG cutters, a medium-sized CCG ship, and two speedboats maneuvered dangerously close to Philippine activists and fishermen who raised a Philippine flag at the shoal. I was an eye-witness on that day.

Thursday, four Chinese Coast Guard (CCG) boats denied Filipino fishermen access to Scarborough, which is 139 miles from the Philippine coastline and within the Philippine exclusive economic zone (EEZ). Scarborough Shoal is 539 miles from Hainan Island, the closest point in China.

On Monday last week, a CCG cutter and speed boat warned and turned back two New York Times reporters who had chartered a yacht to Scarborough. It is likely that the other CCG boats at the shoal did not make themselves visible. The reporters met a fishing boat on the way home that confirmed that the CCG was not allowing them to fish at the shoal — and as a result their normal $1000 catch was reduced to a few hundred. China’s blocking of Philippine fishermen from access to the shoal is in direct violation of the PCA ruling on Tuesday.

Not all analysts saw the PLAAF’s Scarborough flight as necessarily indicative of a threat. “Things are still fresh since the arbitral decision and reading hostile or proactive intent into the flight of [a] single Badger would be pure speculation, especially since flights like this have occurred prior to the decision,” said Michael Listner. Mr. Listner is a Principal at Space Law & Policy Solutions. “That isn’t to say the Badger flight isn’t significant and may have internal propaganda value, but it has to be taken in the context of the totality of other actions China may take. Analysts should be watching and take this flight into consideration, but they should not jump to conclusions about China’s intent towards the disputed territory and their response to the arbitral decision solely on this one flight.”

The H-6K was not visibly carrying cruise missiles beneath its wings. The photos released did not show it accompanied by other bombers, fighter jets, or airborne early warning and control planes. Without these critical complements for an actual tactical flight, the purpose of the H-6K flight could be interpreted as for domestic Chinese propaganda only, rather than strategic signalling to the U.S. The flight was not published in the major English-language Chinese papers, such as China Daily, Xinhua, or People’s Daily.

However, the PLAAF Weibo site did release other photos of military planes in the same post with the H-6K flying over Scarborough. These included another H-6K (tail number 10190) and a Sukhoi SU-27UBK fighter jet.

A Chinese-language news site covering the flights over Scarborough noted that “After the South China Sea arbitration case, the [PLA] Air Force quietly made a big move!” The news site also wrote that “The H-6K over Huangyan Island [Scarborough] … can attack any target in the entire territory of the Philippines.” - FORBES

I worked in military intelligence for five years, including on nuclear weapons, terrorism, cyber-security, border security, and counter-insurgency. I covered and visited Asia and Europe, and worked in Afghanistan for one and a half years. I have a Ph.D. in Government from Harvard University, and a B.A. and M.A. in international relations from Yale University (Summa cum laude). My company, Corr Analytics, provides political risk analysis to commercial, non-profit, and media clients, and publishes the Journal of Political Risk. I am editing a series on the South China Sea conflict, and have covered and visited Africa, the Middle East and Latin America.

The author is a Forbes contributor. The opinions expressed are those of the writer.

I cover international politics, security and political risk.

Follow me on Twitter @anderscorr. If you have any additional information related to this article, contact me at corr@canalyt.com.

 

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