Philippines: Nickel ore loading - latest update


Published: 28 October 2016

Loss prevention: Nickel ore mines which operate while under a suspension order issued by the Department of Environment and Natural Resources (DENR)

The Association refers to the last report on this matter on 29 September 2016. Since that date it has come to the Association's attention that nickel ore mines which operate while under a suspension order can result in vessel delay and/or detention if the mine in question does not have an Ore Transport Permit (OTP) and/or a Mineral Ore Export Permit (MOEP).

Vessels can be subject to surprise inspection and crew subject to interrogation and subpoenas. We are aware of at least one vessel that has been subject to such an inspection and is still under detention pending the resolution of the matter with local authorities. While this should be a matter for charterers and shippers, it is clear that owners, the vessel and crew can get caught up in what is essentially a local dispute.

Failure to have an OTP and MOEP is a breach of local regulations that could expose owners to fines or other sanctions beyond the delay to the vessel and also may expose the master and crew to criminal penalties. The situation is uncharted at present so it is not possible to say with any certainty what the legal effect on owners, the vessel and crew would be for breach of these local environmental regulations.

We suggest that if members intend to do this trade that they check beforehand which mine or shipper is involved and that the relevant party is not on a suspension or banned list or in breach of local regulations regarding the OTP and MOEP. Members should be warned that failure to make these checks and subsequent breach of local regulations as a result of dealing with mines that have been suspended and or banned or served with suspension orders may mean P&I cover for claims arising as a result is prejudiced.

We refer members to the Associations Rule 30.4.3:
Rule 30.4.3: "liabilities, costs or expenses which arise out of or are consequent upon the vessel carrying contraband, blockade running or being employed in a trade or on a voyage which is unlawful or which the Board of Directors considers to be imprudent unsafe, improper or unduly hazardous."

Loss prevention tips regarding suspended mines

Before fixing the contract, owners should request the following from their charterer:

  • Port/anchorage of loading and estimated time of arrival
  • Date of intended loading
  • Charterer/shipper's details
  • Full details of the mine involved
  • Agent's details
  • Copy of the shipper's cargo declaration and supporting certificate
  • Confirmation that shippers have stockpiles and are not engaging in open source mining
  • Confirmation and a guarantee that the mine and shipper are not subject to any ban or suspension order or pending any suspension order or in contravention of any local regulations
  • Confirmation and proof that charterers have full P&I cover and details of the insurance provider
  • Pre-checks with a local correspondent whether, prior to fixing, the shipper/mine had been involved in previous incidents and is one of the 31 mines now suspended/pending suspension and/or is likely to be targeted or has failed an environmental audit

The DENR has released a list of mines facing suspension:

  • a. Libjo Mining Corporation
  • b. AAM-Phil Natural Resources Exploration and Development Corporation - Parcel 1 and Parcel 2B
  • c. Krominco Incorporated
  • d. Carrascal Nickel Corporation
  • e. Marcventures Mining and Development Corporation
  • f. Filminera Resources Corporation
  • g. Strongbuilt Mining Development Corporation
  • h. Sinosteel Philippines HY Mining Corporation
  • i. Oriental Synergy Mining Corporation
  • j. Wellex Mining Corporation
  • k. Century Peak Corporation - Rapid City Nickel Project and Casiguran Nickel Project
  • l. Oriental Vision Mining Philippines Corporation
  • m. CTP Construction and Mining Corporation
  • n. Agata Mining Ventures Incorporated
  • o. Hinatuan Mining Corporation
  • p. Benguet Corporation
  • q. Lepanto Consolidated Mining Company
  • r. OceanaGold Phils, Incorporated
  • s. Adnama Mining Resources, Incorporated
  • t. SR Metals, Incorporated

There are 11 mining firms which are not recommended for suspension, but will continue to be monitored. They are:

  • a. Philex Mining Corporation
  • b. Rio Tuba Nickel Mining Corporation
  • c. Atlas Consolidated Mining and Development Corporation
  • d. Techiron Resources Incorporated
  • e. Cagdianao Mining Corporation
  • f. Taganito Mining Corporation
  • g. Platinum Group Metals Corporation
  • h. Greenstone Resources Corporation
  • i. Philsaga Mining Corporation
  • j. Pacific Nickel Philippines, Incorporated
  • k. Apex Mining Company Incorporated

Obligations for members to comply with the IMSBC Code and the effect of noncompliance on Club cover

Carrying cargo that is in non-compliance with the IMSBC Code potentially jeopardises cover. Liabilities and losses which arise as a result of carrying cargo not in compliance with the IMSBC Code could preclude recovery from the Association. It is important to stress that members are required to comply with international regulations and conventions regarding safety. Non-compliance could expose members to a gap in their cover. Compliance is assessed objectively and is not based on positive knowledge or intent.

In June 2012 all the International Group clubs issued a circular informing members of mandatory notification requirements should members wish to carry cargoes of nickel ore from the Philippines and or Indonesia. We take this opportunity to remind members that this notification requirement has not been withdrawn.

Shipper's certificates in the region of Mindanao at present may not be reliable

We remind members that very wet cargo is being shipped out of the Mindanao / Surigao area at the moment. On one vessel the stated TML on the shipper's certificates prior to loading was vastly different from the actual TML with the cargo being in breach of the IMSBC Code. If the cargo is in breach of the IMSBC Code as advised above, members are reminded that P&I cover for claims arising as a result of carrying cargo in breach of the IMSBC Code is prejudiced.

Before loading what should members do?

Owners should request the following from their charterer:

  • Port/anchorage of loading and estimated time of arrival
  • Date of intended loading
  • Charterer/shipper's details
  • Mine operator full details
  • Agent's details
  • Copy of the shipper's cargo declaration and supporting certificate
  • Pre-checks with a local correspondent whether prior to fixing the shipper/mine had been involved in previous incidents and or is suspended or banned

The correct procedure in dealing with these cargoes is to inspect stock piles on shore before loading takes place and review the shippers' declaration/certificates on the TML before loading takes place. If the cargo is visibly different and/or red flags exist that may cast doubt on the reliability of the shipper's certificate. In such circumstances independent samples should be taken by an appointed expert and/or a surveyor and analysed at an independent laboratory before any cargo is loaded on board the vessel.

What are the red flags?

The following list, which is not exhaustive, highlights some of the tactics and conditions arising locally which we characterise as "red flags":

  • Poor weather/excessive rain
  • Refusal to allow owners' surveyors to inspect stock piles or mines prior to loading
  • Open source mining with no ability for drying
  • Stock piles where there are no drains to let water to run off
  • No cover on stock piles
  • Uncovered barges
  • Sun drying
       * This is a practice whereby shippers state that the cargo has dried in the sun while on the barge. The top layer may appear dry but without turning the cargo underneath it is not possible to ensure that the lower layer of cargo is dry. Also if sun drying occurs on the barge it may be open to the elements and if it is in a period of rain no real drying will occur. Likewise, sun drying cannot occur at night.
       * Alleged sun drying of cargo in conditions where limited sun and limited time given for drying
       * Representing after a period of time rejected barges with the excuse that sun drying has taken place
       * Representing rejected barges at night
  • Attempts to limit the crew and/or surveyors access to take samples for testing from the barges
  • Reports on vessels in the area receiving very wet cargo
  • Shippers attempts of persuasion and in some cases violent threats to load cargo that fails can tests

A cargo loaded in October 2016 and the pictures shows a hold on arrival in China for a vessel where the cargo liquefied and the vessel arrived with a slight list.

The owners are put in a far worse position legally and practically once they start loading, and it is strongly advisable that a cargo survey is conducted before the vessel arrives. The problem is that shippers routinely present inaccurate TML certificates which create a false presumption of IMSBC code compliance. Owners are routinely prevented from doing shore sample testing and masters are forced to rely on can tests which, if passed, will not guarantee that the cargo won't liquefy. If the can test is passed however, owners are put under severe pressure to load and this includes outright threats against their lives.

Before fixing the charter party what should members do?

To ensure members are protected we suggest members incorporate a nickel ore protective clause in the CP – for example from BIMCO.

The Association is seeing many clauses at the moment inserted in charter parties which seek to put the onus on the master to check and reject wet cargo before loading and which seek to reduce charterers' and shippers' obligations to provide cargo in compliance with the IMSBC Code. Such clauses should be rejected. It is not possible for the master to determine visually whether the cargo complies with the IMSBC Code or not, for the simple reason that some cargo can pass a can test but still be in excess of TML.

Indeed, the IMSBC Code specifically warns about the fact that cargo can pass a can test and still not be within the IMSBC Code. Nickel ore cargo from this region has a very high clay content which can make it difficult for a master to simply determine by visual examination only whether the cargo complies.

This is why we recommend when in doubt or when there are the red flags as outlined above, that extra measures to ensure the cargo complies with IMSBC Code should be taken before any cargo is loaded. Once cargo is loaded it can be almost impossible in the present political climate to have the cargo removed from the vessel locally or at a port of refuge within the Philippines.

The Association also recommends that before fixing the cargo, owners should check charterers have full P&I cover and confirm which Club is covering the charterers and obtain confirmation of cover.

Nickel ore cargo from this region has substantial risks that may outweigh the potential profit.

We strongly advise all owner members to consider whether they should carry this cargo. The political situation outlined in our circular of 29 September 2016 has not improved. The majority of the 41 mines are under some form of audit or suspension order, the cargo from the area is being loaded at present in very wet conditions and November will start the traditional wet season which will make it less likely that dry cargo is available. If vessels get into difficulty with wet cargo or with action being taken against them because of the suspension order placed on the relevant mine, it may not be possible given the present unrest in the region for the Association to assist locally in the Mindanao region. Foreign experts and surveyors and, in some cases, bringing the vessel to a port of refuge to allow treatment of the cargo may not be available either.