Exclusive: China's base metals output in January

SHANGHAI, Feb 7 (SMM) – This is a roundup of China's base metals output in January 2020, from an SMM survey of major producers.

Copper

China’s output of copper cathode declined sharply in January, due to environmental protection-related curbs and as some smelters scaled back operations after fulfilling the production targets for 2019. This came after three consecutive months of gains, as newly-commissioned projects have largely ramped up.

SMM data showed that China produced 725,900 mt of copper cathode last month, down 9.88% from December and 1.4% from January 2019.

Chinese authorities have extended the Chinese New Year holiday and imposed restrictions on transportation to contain the fast-spreading coronavirus epidemic that began in late January. This led to logistics issues which have impacted the delivery of raw materials and accessories to copper smelters as well as shipments and sales of copper cathode and the by-product sulphuric acid. Some copper smelters, grappling with storage capacity shortages and logistics constraints, plan to trim output in February or bring forward maintenance.

Production of copper cathode in China is estimated to slip to 701,300 mt in February, a year-over-year decline of 2.54%. This will bring production in the first two months of 2020 to 1.43 million mt, down 1.96% year on year.

Alumina

China produced 5.81 million mt of alumina in January, with metallurgical-grade materials accounting for 5.56 million mt.

Last month, production of metallurgical-grade alumina averaged 179,000 mt per day, down 9.36% from January 2019 and 1.12% from December as Guangxi Xinfa reduced its annualised capacity in operation to 1.8-2 million mt on market factors.

Lower prices of bauxite and alkali reduced costs of alumina in January, combined with higher prices of spot alumina, narrowed losses at domestic producers. But this failed to trigger significant capacity resumption at alumina refineries that previously cut or halted production, due to bauxite shortage (as seen in Chinalco Huaxing), and environmental production curbs in heating season (Henan Zhongmei, Luoyang Wanji). Large-scale producers such as Jiaokou Xinfa also have no plan to resume operations.

The recent epidemic outbreak has significantly slowed road transport in China’s northern regions, such as Henan, Shanxi, Shandong and Inner Mongolia, tightening raw material supply at some alumina refineries. In Shanxi, Huaqing and Aokaida have scaled back operations, while Xinfa’s plant in Xiaoyi shut down a roaster. Xing'an Chemical halted a low-temperature line with designed capacity of 650,000 mt/year, as disrupted road transport from the port lowered its stocks of imported bauxite. Xinfa’s plant in Chiping, Shandong has also closed a roaster. In southwest China including Guizhou, Guangxi, and Chongqing, alumina refineries keep their capacity in operation barely changed from levels seen at the end of January. Feedstock inventories are able to meet production demand as the virus impact on local transportation was limited. Some firms, such as Chongqing Bosai, saw their inventories of finished products higher than the pre-holiday level due to slow shipments. Jingxi Tiangui started batch charging to produce aluminium hydroxide in mid-January, and did not yield alumina in January. Its alumina output in February will depend on the production of aluminium hydroxide.

As of early February, metallurgical-grade alumina capacity in operation declined to 64.41 million mt on an annualised basis, with the coronavirus outbreak affecting 1.8 million mt of capacity (including the impact of the shutdown of roasters). SMM estimates China’s production of metallurgical-grade alumina at 5.12 million mt in February, with the daily output falling to 176,000 mt.

Aluminium

China’s primary aluminium output grew to 3.07 million mt in January, to produce a year-over-year increase of 3.5%.

As of the end of January, there was 36.52 million mt/year of primary aluminium capacity in operation in China, with operating rates across Chinese primary aluminium producers at 89.5%, up 0.8 percentage point from levels seen at the end of December 2019.

High profits encouraged smelters to ramp up operations last month, leading to higher operating rates across Chinese primary aluminium producers. Idled projects in Qinghai and Inner Mongolia restarted, while new projects in Yunnan and Sichuan were commissioned or ramped up.

Primary aluminium producers have not heard to have trimmed their output due to the epidemic, but concerns about alumina supply are growing given transport restrictions and the extended holidays.

Production of primary aluminium is expected to drop to 2.88 million mt in February, which has only 28 days. This would mark a 7.34% increase from the same month of 2019.

With the epidemic delaying the resumption of aluminium processors, social inventories of primary aluminium ingots are likely to exceed 1 million mt by the end of this month.

Zinc

China’s zinc output declined in January as the impact of maintenance and suspension at zinc smelters during the CNY holiday outweighed ramped-up operations at large-scale producers.

About 534,500 mt of refined zinc was produced in China in January, down 0.47% on the month but up 23.1% on the year. Capacity covered in the SMM survey amounted to 6.09 million mt on an annualised basis.

Last month, zinc smelters including Hunnan Taifeng, Hunan Lantian Chemical, Honghe Hezhong Zinc conducted maintenance and small and medium-scale smelters in Hunan were away for holidays for 10-15 days. Zhuzhou Smelter and Henan Yuguang, meanwhile, raised output to operate in full capacity in January. 

Separately, China’s refined zinc smelters produced 79,400 mt of zinc alloy in January, down 1.62% from a month earlier. Production of hot-dip galvanised alloy accounted for 66,800 mt.

Inventories of sulphuric acid and finished products at some smelters have kept rising as the spread of virus disrupted cargo shipments and delayed the resumption of downstream demand. Smelters with greater inventory pressure of sulphuric acid cut their planned production of zinc for February. Smelters in Yunnan and Hunan also extended their CNY holidays as the local governments control population movement.

SMM expects refined zinc production in China to fall 46,600 mt from January to 487,900 mt in February.

Nickel

China’s production of refined nickel declined 10.53% in January to 14,300 mt, producing a year-over-year decrease of 16.97%.

On the backdrop of the epidemic outbreak, nickel smelters in Gansu and Xinjiang are operating as previously planned, while those in Shandong and Tianjin have swung to low gear and those in other regions remain closed.

This is expected to lower refined nickel production in February by 7.78% to 13,200 mt.

The recovery of the smelter in Jilin is likely to help offset the hit on overall production from delayed resumption amid the outbreak.

Nickel pig iron (NPI)

Output of NPI in China slipped 4.52% month on month but climbed 6.86% year on year to 45,500 mt in Ni content in January.

High-grade NPI accounted for 38,400 mt in Ni content, down 3.93% from December, as losses and raw material supply troubles caused by the epidemic prompted producers in Inner Mongolia and Liaoning where costs are relatively higher, to trim output. Some plants in Inner Mongolia have been closed since the CNY holidays.

Production of low-grade NPI fell 7.6% to 7,100 mt in Ni content last month, as some NPI and #200-series stainless steel integrated plants cut production around the CNY holidays. Compared to high-grade material, production of low-grade NPI felt less impact from the epidemic.

NPI production in China is expected to extend the decline in February, falling 0.63% on the month to 45,200 mt in Ni content, as logistics constraints will likely force high-grade NPI producers to curtail production. The latest SMM survey showed that stocks of accessories at most high-grade NPI producers could ensure production for about half a month.

Output of high-grade materials is estimated to shrink 1.25% to 37,900 mt in Ni content, while that of low-grade materials is to increase 2.72% to 7,300 mt in Ni content as some NPI and stainless steel integrated plants will recover operations.

Nickel sulphate

China produced 38,900 mt of nickel sulphate in January, down 17.94% on the month and 20.19% on the year. This included 32,980 mt of battery-grade nickel sulphate and 4,300 mt of electroplating-grade materials. Total output in January translated to 8,562 mt in Ni content.

During the CNY holiday, most of cathode materials producers suspended production, while precursor producers scaled back operations. Even though some major plants maintained production, the holidays still led to a substantial decline in production of nickel sulphate last month.

The epidemic outbreak impacted production at some nickel sulphate producers in January, and the toll on production is set to be more significant in February. Producers that suspended operations during the holiday will not resume till at least the second week of February, and the impact on demand is likely to hurt producers’ willingness to resume operations.

SMM expects China’s nickel sulphate production to shrink 4.21% on the month to 8,202 mt in Ni content in February.

Lead

Primary lead output in China declined as expected in January on the back of a holiday lull. SMM data showed that domestic output of primary lead stood at 257,000 mt in January, down 8.2% on the month and 6.3% on the year.

During the CNY holiday (January 24-February 2), Hunan Yuteng and Yunnan Zhenxing conducted equipment maintenance and some medium-scale and small producers of primary lead halted production for a week. Large-scale primary lead smelters, meanwhile, maintained normal operations during the holidays. The escalated virus outbreak over the holidays caused a limited impact on lead production.

As measures have been taken to contain the spread of the virus after the CNY holiday, smelters that suspended over the holidays are compelled to postpone their resumption. But producers that continued operations during the holiday has felt limited impact. Hunan Yuteng, Yunnan Zhenxing and some other smelters that underwent overhaul over the holidays remain shut, with recovery likely to be delayed.

Some primary lead smelters may scale back production in the near term if transportation controls remain in place, as raw material inventories have been depleted with stocks of lead ingot and by-product sulphuric acid piling up. SMM estimates a decline of nearly 20,000 mt in primary lead output in China this month.

Tin

China’s production of refined tin extended increase in January as the resumption of a major producer in Yunnan offset the impact of a holiday lull. SMM data showed that domestic refined tin output rose 6.5% on the month to 10,782 mt in January.

Some smelters in Yunnan and Jiangxi province slightly cut production in January due to the CNY holiday, the impact of the epidemic and tight supply of tin ore.

SMM expects refined tin production in China to fall to 9,000 mt in February as the virus outbreak delays the post-holiday resumption of some producers.