Exclusive: China's base metals output in November

SHANGHAI, Dec 6 (SMM) – This is a roundup of China's base metals output in November 2019, from an SMM survey of major producers.

Copper

China’s production of copper cathode rose in November for a second straight month, bolstered by the ramp-up of newly-commissioned projects such as Guangxi Nanguo, Yunnan Copper’s phase two in Chifeng and Zijin Mining’s smelter in Heilongjiang.

SMM data showed that 798,800 mt of copper cathode was produced in China last month, up 2.02% from October and 7.07% from November 2018.

Production in January to November stood at 8.14 million mt, up 2.09% from the same period a year earlier.

With the year drawing to a close, the rush to fulfill annual production targets by smelters also helped lift overall output in November, and were largely unaffected by maintenance last month.

Some smelters continued to deal with copper anode and scrap supply shortages last month, but the affected production volume was smaller than the previous month.

Negotiations over supply of copper concentrate and blister copper in 2020, the key raw materials used by Chinese copper smelters, were the primary focus for smelters last month.

With the settled benchmark treatment/refining charges falling sharply from 2019 and bearish outlook for sulphuric acid, most Chinese smelters are worried about operations next year, especially small and medium-scale, private smelters and smelters facing cash flow woes.

Most smelters are maintaining normal production in December. Maintenance is scheduled for Guangxi Nanguo, while copper anode and scrap supply tightness remain troubling for some smelters.

SMM expects China’s production of copper cathode to increase to 807,600 mt in December, with a year-over-year increase of 6.05%.

Total production volume for 2019 is likely to be at 8.95 million mt, up 2.43% from 2018.

Alumina

China's output of alumina stood at 5.71 million mt in November, with metallurgical-grade materials accounting for 5.46 million mt.

Alumina output from January to November totalled 63.06 million mt, down 1.84% from the same period a year earlier. Alumina refineries under suspension or output cuts since October did not resume to normal operation in November. 

Daily average production of metallurgical-grade alumina inched up 0.42% from a month ago to 182,000 mt, still 10.31% lower from a year earlier. 

China’s alumina output is expected to edge lower in December as Luoyang Wanji has only one roasting furnace in operation. Commissioning of the phase-one project at Jingxi Tiangui, with a capacity of 800,000 mt/year, will contribute to the production in December. 

As of early December, metallurgical-grade alumina capacity in operation rose to 69.59 million mt on an annualised basis. 

Daily average production of metallurgical-grade alumina is estimated to extend its increase to 191,000 mt in December, resulting in output of 5.72 million mt of the metallurgical-grade materials for the month. 

Aluminium

Domestic production of primary aluminium fell 0.81% from a year ago to 2.94 million mt in November. Output in January-November stood at 32.39 million mt, with a year-on-year decline of 2.14%.

High profits margins accelerated the resumption of some primary aluminium capacity. SMM survey found that the average profit for producing per mt of primary aluminium exceeded 600 yuan/mt in November. At end November, domestic capacity in operation climbed to 35.9 million mt/year.

Capacity in operation is expected to extend a rally in December with the additions of new capacity in Yunnan, Sichuan, and Inner Mongolia. This may create a year-on-year increase in domestic primary aluminium output in December, after 12 consecutive months of decline on a yearly basis. 

SMM sees China’s primary aluminium production at 3.05 million mt in December, up 1.94% from a year earlier. Inventories across social warehouses will continue to shrink in December albeit a slower pace. 

For 2019, China’s production of primary aluminium is expected at 35.44 million mt, 1.8% lower from 2018; domestic consumption of primary aluminium will amount to 36.07 million mt, down 1.53% year on year. 

Zinc

China refined zinc production continued its increase in November, hitting new highs, on the back of capacity recovery and new projects.

SMM data showed that China produced 530,800 mt of refined zinc last month, up 0.29% from October and 16.31% from November 2018. This brought production in the first 11 months of 2019 to 5.31 million mt, with a year-on-year increase of 8.71%.

On the backdrop of enticing profits, smelters remained productive and companies such as Guangdong Zhongjin Lingnan Nonfemet and Yunnan Chihong Zinc & Germanium rapidly ramped up to full capacity after recovering from maintenance.

The commissioning of the third production line of Hanzhong Zinc Industry also contributed to the production expansion last month.

The increase in production, however, was capped by routine maintenance at Henan Yuguang and Wenshan Zinc & Indium.

Production of refined zinc in China is expected to increase by 1.37% to 538,100 mt this month, 19.98% higher than a year ago. Production is likely to stand at 5.85 million mt in 2019, up 9.66% from 2018.

Nickel

China’s production of refined nickel extended its increase by 4.07% on the month to 14,100 mt in November, as a smelter in Gansu stepped up operations. On a year-on-year basis, the output was 4.71% lower. 

Maintenance at a smelter in Jilin continued last month, and production may resume in January 2020 earliest. It remains unclear when the ongoing overhaul at a smelter in Guangxi will conclude. Other nickel smelters maintained normal operation last month. 

SMM expects the production to trend upwards and hit 16,100 mt in December, as the Gansu smelter will further ramp up production to make up for the impact from the previous maintenance. 

Nickel pig iron (NPI)

Output of NPI in China rebounded 1.4% month on month and climbed 27.39% year on year to 53,100 mt in Ni content in November.

High-grade NPI accounted for 45,300 mt in Ni content last month, down 1% from October, while production of low-grade materials rose 18.11% to 7,800 mt in Ni content following the resumption of some smelters after maintenance. 

A decline in nickel prices in late-November dragged prices of high-grade NPI to close to the cost line, after high profit margins supported production in the first half of the month. High-grade NPI producers did not scale back output significantly on the squeezed margins, resulting in a moderate decline in high-grade NPI output last month. Production at low-grade NPI mills was stable last month. 

China’s NPI production may continue to rise 0.13% from November to 53,200 mt in Ni content in December, as output of high-grade material is expected to recover 0.15% to 45,400 mt in Ni content amid production recovery after overhaul. 

Output of low-grade NPI is estimated to remain flat at 7,800 mt in Ni content in December. 

Nickel sulphate

China produced 44,300 mt of nickel sulphate in November, down 6.78% month on month but up 8.98% year on year. This translated to 9,746 mt in Ni content.

Reduced orders amid weakened downstream demand drove integrated nickel sulphate and precursor plants to slash production last month.

Prospect of falling demand may continue to weigh on domestic nickel sulphate production to 43,200 mt, or 9,493 mt in Ni content in December, 2.6% lower than November. SMM learned that some precursor plants planned to expand output cut and take a break in advance.

Lead

Primary lead output in China had a greater increase in November as smelters including Henan Yuguang, Henan Jinli, Xing’an Silver & Lead, and Haicheng Chengxin recovered from maintenance, and phase-two production lines at Hunan Shuikoushan Zhihui smelter commissioned. 

Jiangxi Jinde and Henan Xinling, meanwhile, remained in regular maintenance last month. This, coupled with reduced output at West Mining and Yunnan Chihong due to equipment issues, capped the overall increase in lead production in November. 

SMM data showed that domestic output of primary lead stood at 271,000 mt in November, 3.95% higher than October and 2.4% higher than November 2018. Production in January to November was up 0.87% from the same period a year ago.

Continued rises in treatment charges (TCs) of lead concentrate encouraged production enthusiasm at primary lead smelters, and this was also behind the greater-than-expected increase in primary lead output. 

SMM assessments indicated that the monthly TCs for imported 60% Pb lead concentrate have climbed for the fourth consecutive month, to $115/dmt in December, up $90/dmt from August. 

December TCs for domestic 50% Pb lead concentrate have increased for the third straight month to stand at 2,150 yuan/mt, 300 yuan/mt higher than September (both on a metal content basis). 

SMM expects domestic production of primary lead to extend its increase by around 10,000 mt in December, as Henan Xinling, Jiangxi Jinde and West Mining resume after overhaul.

Sufficient supply of lead concentrate will continue to boost TCs and support production at primary lead smelters amid falling lead prices. SMM assessed trades of TCs for domestic 50% Pb lead concentrate occurred at 2,200-2,400 yuan/mt in metal content as of December 6. 

Stockpiles of crude lead will ensure production at refined lead smelters albeit frequent smog alert in the northern China regions such as Henan province amid the heating season.

Tin

China’s production of refined tin dropped 24.6% from a month ago to 7,520 mt in November, as Yunnan Tin, the world’s largest producer of such material, remained shut for equipment overhaul.

Brief maintenance at some smelters and the closure of some smelters in regions like Yunnan and Jiangxi also contributed to the sharp decline in overall tin production last month.

Production of refined tin in China stood at 129,647 mt from January to November, down 13,579 mt, or 9.48% from the same period a year earlier.

Notably, operating rates of Chinese tin smelters slipped to the lowest in nearly four years at 31.3% last month, according to SMM data.

The resumption of Yunnan Tin is expected to lift production of refined tin to 10,000 mt this month, after three consecutive months of declines, even as some smelters will close for Chinese New Year.