Exclusive: China's base metals output in Aug

SHANGHAI, Sep 10 (SMM) – This is a roundup of China's base metals output in August 2019, from an SMM survey of major producers.

Copper

Copper cathode production across China in August was lower than expected, as Baiyin Nonferrous Metals and Minmetals Copper failed to recover production from maintenance and also tighter supplies of copper anodes affected production at some secondary copper smelters.

The SMM survey showed that China produced 767,700 mt of copper cathode last month, up 1.66% from July and 4.12% from August 2018. SMM expected copper production to increase to 772,400 mt in August.

For the first eight months of 2019, output of copper cathode amounted to 5.8 million mt, rising 0.15% year-over-year.

In August, blister copper refining charges fell to 1,100-1,300 yuan/mt on a deliver-to-factory basis for domestic materials, and $140-155/mt on a cif basis for seaborne materials, showed SMM assessments. This was far below levels seen in long-term contracts, and similar to cash costs for turning blister copper to copper cathode.

As China’s National Day approaches, concerns grow that copper smelter operations will be subdued by greater environmental pressure in the run-up to China’s 70th founding anniversary.

Smelters have yet to feel the impact as SMM understood, but they are concerned about potential transport controls. It would exert great pressure on some copper smelters, if authorities impose restrictions on the transportation of sulphuric acid.

Most copper smelters will recover from maintenance in September, except for SDIC Jincheng Metallurgy and Hongyue North Copper. This is likely to expand copper production to 782,300 mt for the month, with a year-over-year increase of 9.14%.

Production in January-September will likely grow 1.14% from a year ago to 6.58 million mt.

Jiangtong Fuye Heding Copper and Jinchuan Group have decided to postpone maintenance on their copper smelting facilities from the originally planned September to next year.

Alumina

China's output of alumina stood at 5.82 million mt in August, with metallurgical-grade alumina accounting for 5.57 million mt.

Daily average production of metallurgical-grade alumina shrank about 4,000 mt from July and stood at 180,000 mt, pressured by lower output at Xing’an Chemicals, Henan Huiyuan, Henan Zhongmei, Bosai Group’s Shuijiang project, Shanxi Zhaofeng, East Hope’s Lingshi refinery, and SPIC Shanxi New Energy. Falling alumina prices and bauxite supply tightness caused the output cuts at those producers.

Output of alumina is expected to reach 5.8 million mt in September, which includes 5.56 million mt of metallurgical-grade alumina. Daily average output of metallurgical-grade alumina will be lifted to 185,000 mt, on the expected resumption of Xinfa's Jiaokou refinery and the end of maintenance at Xing’an Chemicals. Some other refineries are also likely to raise output after previous cutbacks, as bauxite shortage eases. As of September 10, capacity of metallurgical-grade alumina in operation has improved to 67.76 million mt on an annualised basis.

Aluminium

Domestic production of primary aluminium decreased by 3.48% from a year ago and by 1.96% from a month ago to stand at 3.01 million mt in August, as accidents in some smelters in Shandong and Xinjiang deterred production.

This brought output in the first eight months of this year to 23.57 million mt, with a year-over-year decline of 1.89%.

Commissioning of new or recovered capacity remained slow. As of the end of August, primary aluminium capacity in operation slipped to 34.9 million mt/year, with suspended and idling capacity standing at 5.8 million mt/year. Operating rates across domestic primary aluminium smelters averaged 85.8% by the end of August, down 4.7 percentage points from a month earlier.

For September, China’s primary aluminium output is expected at 2.92 million mt, down 2.76% year on year, but capacity in operation may expand at the end of September on capacity additions and resumption.

Nickel

Production of refined nickel in China stood at 12,670 mt in August, up 0.56% from July and 11.36% from August 2018, showed the SMM survey.

A smelter in Gansu put its one production line under maintenance for about a month ending at the middle of August. This impacted production by some 1,000 mt.

Nickel production is expected to rise to 14,000 mt in September, as greater profit margins encourage smelters to shift from nickel sulphate production to nickel metal after nickel prices soared. This includes smelters in Gansu and Shandong.

Nickel pig iron (NPI)

Output of NPI in China rose 4.82% from a month ago to a record high of 53,200 mt in Ni content in August, as high profit margins prompted smelters to ramp up operations.

August’s NPI output was up 38.22% from a year ago, as environmental pressure subdued production in the same period last year.

As smelters in major producing hubs such as Shandong and Inner Mongolia stepped up production on high profits, output of high-grade NPI grew 5.62% from July to 46,000 mt in Ni content last month.

Output of low-grade materials, meanwhile, held stable at 7,200 mt in Ni content.

NPI production is expected to shrink 0.18% month on month to 53,100 mt in September, as output of high-grade materials declining 0.56% to 45,700 mt.

Production of low-grade NPI will likely rise 2.22% to 73,700 mt, as some smelters in the north recover.

Overall NPI production will rise 28.38% from a year ago in September.

Nickel sulphate

China produced 9,876 mt in Ni content of nickel sulphate in August, which translated to 44,900 mt in physical content.

This was up 16.6% from a year ago and 1.66% from a month ago, bolstered by the ramp-up of newly-commissioned capacity and recovery from production curtailments.

The growth in production, however, was limited by production cuts at some integrated producers of nickel sulphate and precursor, who procured nickel sulphate for production instead of producing nickel sulphate from nickel briquette or powder on their own, as the latter will incur losses.

Demand from new energy vehicle batteries improved last month, but has yet to recover to levels seen before the government subsidy cuts took effect in late June.

Despite poor demand, output of electroplating-grade nickel sulphate held stable last month.

Producers’ shift from nickel sulphate to pure nickel is expected to lower output of nickel sulphate by 5.48% from August to 42,400 mt, or 9,335 mt in Ni content, in September. Prices of battery-grade nickel sulphate have been lower than those for pure nickel for months.

Zinc

China's production of refined zinc continued its increases in August as smelters moved up a gear after resumed from maintenance, the SMM survey showed.

About 499,200 mt of refined zinc was produced across China last month, up 1.74% from July and up 19.24% from August 2018. Surveyed capacity remained unchanged at 6.085 million mt/year. Production in January-August amounted to 3.73 million mt, up 6.02% from the same period last year.

Recovery of smelters including Henan Yuguang, Shaanxi Zinc, and Anhui Tongguan contributed to the higher output in August. Despite overhaul in some smelters in Yunnan province, production of the area accounted for a great share of the overall growth. Hanzhong Zinc in Shaanxi hiked its output. Maintenance in Inner Mongolia, though concluded by the end of August, capped the increase in domestic production last month.

For September, ramped-up output in Inner Mongolia after maintenance and production enthusiasm on high treatment charges for zinc concentrate will extend increases in overall refined zinc output, despite new maintenance at some smelters in south China.

SMM expects China’s output of refined zinc to increase by 1.1% on the month and by 12.98% on the year, to stand at 504,700 mt in September. Output in January-September will expand 6.81% from a year ago to 4.24 million mt.

Lead

Primary lead production across China increased from a month ago in August as smelters recovered from concentrated maintenance, but the growth failed to meet SMM’s expectations due to equipment breakdown at some smelters in Henan and Jiangxi provinces.

SMM data showed that domestic output of primary lead stood at 254,000 mt in August, up 15.23% from July and up 1.12% from August 2018.

This brought production in the first eight months of this year to 1.96 million mt, with a year-over-year increase of 0.96%, accelerating from a rise of 0.93% in January-July.

Last month, smelters of Henan Yuguang, Minshan resumed after maintenance; Guangxi Nanfang, West Mining, and Shandong Humon ramped up to full operation after recovery. Commissioning of battery scrap treatment capacity in Yunnan Chihong also helped bolster the production in August.

SMM expects production of primary lead to edge lower to 248,000 mt in September as fresh maintenance at Henan Yuguang, Jiangxi Copper, and Yunnan Mengzi may outweigh the impact of production resumption at Henan Minshan and Hunan Shuikoushan. Production at Yunnan Chihong will further improve this month as its battery scrap treatment capacity ramps up.

The overall decline in primary lead output could widen in September if air quality deteriorates in the Beijing-Tianjin-Hebei region and surrounding areas, driving local smelters into cutbacks, before China celebrates its 70th anniversary in October. Local smelters have yet to face output controls so far.

SMM learned that some primary smelters in Henan have been required to cut pollutant emissions by 10%, based on the average in August, in the run-up to the National Day holiday.

Tin

Production of refined tin in China climbed 1.4% from July and came in at 12,747 mt in August, SMM data showed, as some smelters in Yunnan province returned to normal operation after previous output cuts.

Smelters in Jiangxi province minimally received the impact of environmental curbs last month, which prevented a significant decline in local output compared with July.

SMM estimates domestic production of refined tin to slip to 12,300 mt in September as tin concentrate supply remains tight and treatment charges for concentrate stand at lows.

Fourteen major Chinese tin smelters agreed in early September to slash production by the end of this year, in a bid to counter raw material shortage and prop up the market. This could also threaten lower output in September.