[SMM Analysis] preliminary investigation on the impact of Koniambo Refinery accident in New Caledonia

Project description: Koniambo is a joint venture between Glencore and SMSP in New Caledonian, in which Glencore has a 49 per cent stake. The first production line of the project was put into production in November 2013 and the second line was put into production in February 2014. In December 2014, the smelter was closed for six weeks because of a leak.

Start of operation: the smelter produced 28300 metal tons in 2018 and started two production lines, which is less than half of its annual production capacity of 60000 metal tons; before the 2019 leakage accident, its production has declined due to the failure of one production line, and its monthly output has dropped to about 1000 metal tons; after the leakage accident, its smelter is currently in a state of shutdown, and the mining of laterite nickel mines remains normal.

SMM analyzed the customs data. In May 2019, China imported 23738 metal tons of ferronickel (including NPI, FeNi, etc.), of which the amount from the smelter was 1752 physical tons, that is, about 876 metal tons, accounting for 3.7% of the total imported metal volume, higher than the proportion of the smelter output in the global nickel production. The previous output situation can also be seen that exports to China occupy the main position of the smelter shipment. It is understood that a number of mainstream steel mills in East China and South China also use the products of the smelter.

At present, the accident smelter has not yet specified the date of resumption of production, according to research, the severity of the accident is not large, or can be recovered within a few months. SMM believes that if the smelter shutdown time is short, the overall impact on fundamentals is indeed relatively limited, in the short term, the news does have a certain boost to market sentiment.

In addition to Glencore, the world's other high-grade (Ni ≥ 30%) FeNi suppliers are mainly South32 (Colombia), Falcondo (Dominican Republic), Anglo American (Brazil), etc., other suppliers are normal supply, and FeNi generally signed a longer cycle, will be monthly and quarterly as a unit, the current research down has not raised product price dynamics, the latest market SMM will continue to pay attention to.