Exclusive: China's base metals output in May

SHANGHAI, Jun 8 (SMM) – This is a roundup of China's base metals output in May 2020, from an exclusive survey of key producers by SMM analysts.

Copper

China’s copper cathode output continued to rise in May after some of the smelters recovered from maintenance.

Although some smelters were on maintenance in late May, refined copper production was not affected significantly due to ample inventories of anode plates. Production of refined copper is expected to feel the impact from maintenance in June as the existing anode stockpiles will be depleted by then.

The latest SMM survey showed that China produced 770,100 mt of copper cathode in May, up 2.35% from April. The output marked an increase of 21.56% from May 2019, when a large number of smelters were shut for maintenance.

For the first five months of 2020, China’s copper cathode output stood at 3.68 million mt, up 3.62% from the same period last year.

The output is expected to fall 4.66% on the month to 734,200 mt in June, as more smelters will conduct maintenance amid tight raw materials supply. On a yearly basis, the output would be 0.81% higher.

The tally for the January-to-June period would reach 4.41 million mt, with a year-over-year increase of 3.14%.

Treatment charges (TCs) for imported copper concentrate continued to fall on strong demand for shipments scheduled for arrival in recent months, while refining charges (RCs) for domestic blister copper remained at low levels. Supply of copper raw materials is expected to further tighten in June-to-July in anticipation of reduced seaborne arrivals.

Alumina

China’s alumina output stood at 5.83 million mt in May. This included 5.58 million mt of metallurgical-grade alumina, with the daily output up 0.1% on the month but down 6.54% on the year to 180,000 mt. Output of metallurgical-grade alumina in the first five months of the year totalled 27.14 million mt, 8.19% lower on the year.

Capacity reduction in late-April, together with short-term maintenance at alumina refineries in Guangxi and Henan (such as Chinalco Guangxi plant) in May capped the overall increase in daily alumina output. Slight increases in alumina prices prompted some refineries in north China to hike output, and this led to a month-on-month increase of 200 mt in the domestic daily output of alumina in May.

As of early June, the operating capacity of metallurgical-grade alumina stood at 65.58 million mt/year.

SMM sees output of metallurgical-grade alumina at 5.44 million mt in June, with the daily output edging higher on the month to 181,300 mt, due to the resumption of capacity from maintenance in May and potential capacity additions at State Power Investment Corporation Zunyi plant. Capacity expansion and resumption at alumina refineries will be closely monitored.

Aluminium

China’s primary aluminium output rose nearly 1% year on year to 3.07 million mt in May (31 days). As of the end of May, there was 36.58 million mt among 41.23 million mt per year of existing primary aluminium capacity in operation, up 700,000 mt from a month ago, while operating rates across Chinese primary aluminium producers inched up 0.2 percentage point to 88.7% as new and resumed capacities in Xinjiang, Inner Mongolia and Sichuan ramped up.

During the first five months of 2020, China’s primary aluminium output increased more than 3% year on year to 15.01 million mt, while consumption shrank 2.39% to 14.27 million mt. The decline in consumption was smaller than a drop of 5.5% seen in the January-to-April period as inventories continued to fall.

China’s production of primary aluminium is expected to increase 1.6% to 2.98 million mt in June (30 days) from a year earlier, in view of the ramp-up of new capacities in Yunnan, Sichuan and other regions.

Nickel

China’s production of refined nickel continued to fall in May, dipping 2.36%, or 340 mt, from a month ago to 14,100 mt in May, producing a year-over-year gain of 8.99%.

Production at smelters in Gansu declined on the month in May but their output remained higher from the same period last year on the backdrop of stable operation.

Output at Xinjiang smelters rose 10% month the month in May amid favourable production environment.

Smelters in Jilin and Shandong held their production flat on the month. Output at Tianjin smelters decreased in May, and the smelters may face issues of costs and raw materials in the near term. Smelters in Guangxi have halted production and planned to resume output in Q4.

SMM expects China’s refined nickel output to little change from April and May, standing at 14,400 mt in June. Domestic production environment is seen stabilising in Q2 and there is no adjustments to output targets from smelters, according to market participants.

Nickel pig iron (NPI)

China’s production of NPI increased in May after five consecutive months of decline since November 2019, driven by the resumption and ramping-up production at major high-grade NPI producers. SMM data showed that China’s NPI output rose 15.15% on the month to 44,200 mt in Ni content in May. On a yearly basis, the NPI output was 7.49% lower in May.

Production of high-grade NPI rebounded 17.92% on the month to 36,900 mt Ni, while that of low-grade materials extended increase by 2.88% month on month to 7,300 mt Ni.

During the May-June period, production of high-grade NPI may expand while capacity is in a downward trend, due to gradual phasing out of high-cost capacity. Some producers halted operation or shifted capacity to other alloys in May, but higher production of #300 stainless steel bolstered demand for high-grade NPI and this increased the willingness to restart production for some major NPI plants, who drastically cut output in the previous months. 

The rise in low-grade NPI output was moderate in May, driven by a slight increase in #200 stainless steel output at integrated stainless steel and NPI mills.

SMM expects China’s NPI output to continue to expand in June to 45,100 mt Ni, up 2.08% from May, with the output of high-grade NPI rising 2.97% on the month to 38,000 mt Ni and production of low-grade materials dipping 2.43% to 7,100 mt Ni. 

Eased tightness of nickel ore supply at major NPI plants, high demand for NPI from rising stainless steel output and stepped-up operations of new capacity, despite the closure of some plants, account for the estimated higher NPI output in June.

Nickel sulphate

China’s output of nickel sulphate extended its decline in May, as weak demand, existing inventories and the ongoing price war forced some producers to trim or suspend production.

An SMM survey showed that 42,800 mt of nickel sulphate, including 35,800 mt of battery-grade materials and 7,000 mt of electroplating-grade materials, was produced in China last month. May’s output translated to 9,400 mt in Ni content, down 3.91% from a month earlier and 29.25% from a year earlier.

Last month, China’s precursor producers began to feel the impact from the Covid-19 containment measures put in place in late March, and foreign orders reduced. A rally in nickel prices lifted costs for nickel sulphate production last month.

Meanwhile, the nickel sulphate industry was also fighting a price war which send traded prices of battery-grade materials towards, or even below costs, and this has prompted some producers to halt or curtail production or switch to other nickel salts.

China’s output of nickel sulphate is expected to rebound 9.59% from May to 10,300 mt Ni in June, on the back of the resumption of some producers.

Zinc

China’s refined zinc output fell as expected in May, as fast declines in TCs for domestic zinc concentrate depressed Chinese smelters production enthusiasm and led to output cut or maintenance at smelters in Hunan and Sichuan, showed the latest SMM survey.

Some smelters in Inner Mongolia, Yunnan, Guangxi and Gansu also carried out maintenance as scheduled, and smelters that recovered from maintenance in May were mostly located in Yunnan, Qinghai and Hunan.

SMM data showed that 474,100 mt of refined zinc was produced in China in May, down 1.14%, or 5,500 mt, from a month ago and down 1.26% from a year earlier. Zinc capacity which was covered in the SMM survey remained unchanged at 6.09 million mt on an annualised basis.

Surveyed smelters produced 70,034 mt of zinc alloy in May, down 5.53% on the month, with hot-dipped material accounting for 45,147 mt.

SMM assessments showed that the mainstream TCs for domestic zinc concentrate declined to 5,000-5,200 yuan/mt in metal content in May with the TCs for imported zinc concentrate falling to $140-160/dmt. 

SMM expects China’s refined zinc output to further drop by 4,600 mt from May to 469,500 mt in June.

With the rally in zinc prices, Chinese miners are stepping up their mining operations and shipments. This drives up raw materials inventories at Chinese smelters and eases the supply tightness of zinc concentrate. Most zinc smelters currently have raw materials stocks that could meet production need for 20-25 days, and smelters in some regions postponed their maintenance schedule to July. Some smelters in Shaanxi and Anhui, meanwhile, have planned for overhauls in June.

Lead

China’s primary lead output continued to rise in May as a rally in lead prices lifted sentiment among smelters, but the growth in production was moderate as gains on recovery from maintenance were largely offset by losses caused by new maintenance.

The output increased 1.07% from April to 265,000 mt in May, 5.13% higher than the same month of 2019. Output in the first five months of 2020 was 2.42% lower than the same period the year before, compared to a decline of 4.3% in the January-to-April period.

Smelters including Henan Minshan and West Mining ramped up production from maintenance last month, while there were ongoing maintenance works at Anhui Tongguan, Yunnan Mengzi and Chifeng Shanjin.

China’s production of primary lead is expected to increase to 272,000 mt in June following the end of maintenance at some smelters, with the growth limited by ongoing production line upgrading in Henan Yuguang and routine maintenance at Yunnan Chihong and Hunan Jingui.

Tin

Refined tin output in China rebounded in May, as demand recovered slightly on the back of global economic re-openings from the Covid-19 pandemic.

China’s  production of refined tin increased 9.3% from April to 11,727 mt in May, showed SMM data.

Some smelters stepped up production last month, but the increase was limited by tight supply of raw materials. Tightness in ore supply is expected to continue into the short term as border restrictions at Myanmar will remain in place until late June.

China’s refined tin output is expected to continue to rise in June, reaching 12,500 mt, as some smelters will step up or resume production.