China will likely see excess NPI supply in Q3

SHANGHAI, Jun 24 (SMM) – The Chinese market is expected to see an excessive supply of nickel pig iron (NPI) in Q3, following well-balanced demand and supply by end-May, as consumption from stainless steel mills may not be strong enough to sustain a draw in high-grade NPI inventories. 

Demand from stainless steel plants will likely hold stable in Q3, given steady production plan at those producers. 

Major stainless steel mills restocked significantly back in early-May, and has prepared for NPI stockpiles able to meet production needs till the second half of August. Other stainless steel producers in China mostly restocked NPI that could guarantee production till late-July. 

The stepped-up purchases reduced inventories of high-grade NPI in China’s major consumption areas to 6,120 mt in Ni content by end-May, showed SMM data. 

NPI inventories in China’s major consumption areas (unit: mt in Ni content, source: SMM)

On the supply front, the impact of lower profits and nickel ore supply shortage on China’s NPI production will remain limited in Q3. SMM expects the phase-out of capacity to cause a monthly decline of 1,500 mt in Ni content in NPI output, which will be partially offset by the resumption of capacity after maintenance and the start of new capacity in north China in Q3. 

SMM expects China’s NPI output in Q3 to slip 3-4% from Q2. Meanwhile, NPI production in the world’s top nickel producing country, Indonesia, is estimated to continue to expand by 17-18% on the quarter. 

Indonesia has overtaken China to become the world’s largest producer of NPI so far this year, as the Southeast Asian country boosted its own NPI capacity to plug a supply shortfall caused by its nickel ore export ban starting from January 2020. 

SMM data showed that the accumulative NPI output in Indonesia in the first half of the year is estimated at 254,200 mt in Ni content, exceeding China’s production of 249,900 mt in Ni content. 

By the end of Q3, Indonesia is expected to produce an accumulative 409,200 mt in Ni content of NPI, as a slew of capacity will commission in Q3. The year-to-date NPI production in China, meanwhile, is expected to grow to 372,900 mt by end Q3.

NPI production in China and Indonesia (unit: 10,000 mt in Ni content, source: SMM)

Note: Indonesian NPI output for 2020 was previously estimated at 530,000 mt in Ni content, with production in China at 510,000 mt in Ni content, based on production schedule at plants surveyed at the end of last year.