Exclusive: China's base metals output in February

SHANGHAI, Mar 6 (SMM) – This is a roundup of China's base metals output in February 2020, from an exclusive survey of key producers by SMM analysts.

Copper

China’s output of copper cathode continued to fall in February, as some of the smelters trimmed output or expedited maintenance on swelling inventories of the byproduct sulphuric acid.

SMM data showed that China produced 683,100 mt of copper cathode last month, down 5.9% from January and 5.07% from February 2019.

The government measures to contain the spread of COVID-19 significantly affected logistics in China in February, disrupting deliveries of copper cathode and sulphuric acid from smelters and increasing sulphuric acid inventory pressure that had already reached high levels.

In late February, the Chinese authorities gradually removed curbs on trans-regional transportation, which helped to slow inventory growth of sulphuric acid and eased pressure on copper smelters. Smelters are recovering their production, while sulphuric acid woes linger and some smelters will conduct maintenance this month.

Concerns about high inventories of copper cathode will also keep smelters from ramping up production sharply this month, as copper consumption is still recovering after downstream processor operating rates stayed at low levels last month.   

Production of copper cathode in China is estimated to rebound in March, increasing 4.74% from February to 715,500 mt to produce a year-over-year decline of 2.54%. This will bring production in the first three months of 2020 to 2.12 million mt, down 3.73% year on year.

Alumina

China produced 5.4 million mt of alumina in February, with metallurgical-grade material accounting for 5.17 million mt.

Last month, production of metallurgical-grade alumina averaged 178,000 mt per day, down 8.19% from February 2019 and 0.52% from January as some refineries in north China cut output amid the COVID-19 outbreak.

Some alumina refineries began to recover production in late February, as their inventories of imported and domestic bauxite recovered to safe levels after truck transport capacity tightness eased and private mines in Henan resumed work gradually. Xinghua Technology has recovered to 700,000 mt/year, and East Hope has also partially recovered.

However, refineries in Shanxi such as Xing’an Chemical and Xinfa in Xiaoyi as well as Huaqing, Liulin and Aokaida, are unlikely to recover or step up production in the short term, as most of the private mines remain closed. 

As of early March, metallurgical-grade alumina capacity in operation declined to 62.86 million mt on an annualised basis, with the virus outbreak affecting 4.65 million mt of capacity.

Some refineries in Henan are likely to recover production after the heating season ends in the mid-March, while higher inventories of raw materials and a rally in spot prices are likely to encourage some refineries that have scaled back operations to recover. 

SMM estimates China’s production of metallurgical-grade alumina at 5.34 million mt in March, with the daily output to falling to 172,000 mt.

Aluminium

China’s primary aluminium output shrank to 2.87 million mt in February, to produce a year-over-year increase of 6.9%.

As of end-February, there was 36.6 million mt/year of primary aluminium capacity in operation in China, while existing capacity was 40.99 million mt on an annualised basis. Operating rates across Chinese primary aluminium producers dipped 0.2 percentage point from end January to 89.3%, as newly-commissioned projects were still ramping up.

China’s production of primary aluminium grew 5.1% year on year to 5.94 million mt in the first two months of 2020. That was faster than consumption growth. As of March 5, social inventories of primary aluminium ingots stood at 1.49 million mt, up 151.35% from the end of 2019.

The COVID-19 outbreak has yet to result in production cuts of primary aluminium, but some of the high-cost producers are thinking of bringing their annual maintenance forward as aluminium prices pulled back and costs improved.

Newly-commissioned primary aluminium projects in Yunnan, Inner Mongolia and other regions are still ramping up, while the commissioning of projects under construction is likely to be delayed due to weaker aluminium prices and manpower issues.

Primary aluminium capacity in operation is expected to rise to 36.75 million mt in March, and monthly production is estimated to increase to 3.08 million mt, 3.3% higher than the same month of 2019.

Refined nickel

China’s production of refined nickel declined 6.96% on the month to 13,400 mt in February, up 11.12% on a yearly basis.

An SMM survey found that two smelters in Gansu and Xinjiang respectively are currently in continuous production as scheduled, given limited impact from the epidemic over the Chinese New Year holiday. But a smaller number of working days in February weighed on production at those smelters last month.

Smelters in Shandong and Tianjin remained in low operating rates, with output in February roughly flat from January. Smelters in Jilin and Guangxi still prioritised the production of nickel sulphate. Refined nickel output at smelters in Guangxi is expected to recover in the fourth quarter, while Jilin smelters have generated small amounts of refined nickel products.

SMM expects refined nickel output in China to rebound 9.11% on the month to 14,700 mt in March, due to ramp-up production at Gansu and Xinjiang smelters. Smelters in Shandong and Tianjin will keep their operating rates at low levels, and raw materials supply issues amid the extended period for customs clearance could further constrain their production schedule.

Nickel pig iron (NPI)

Output of NPI in China slipped a significant 7.46% month on month but climbed 3.97% year on year to 42,100 mt in Ni content in February.

High-grade NPI accounted for 35,800 mt in Ni content, down 6.89% from January, as the COVID-19 outbreak deterred shipments of adjuvant to high-grade NPI plants. Substantial production cut at stainless steel mills in February depressed prices of high-grade NPI, which added to cost pressure at NPI producers and promoted them to reduce output.

Meanwhile, production of low-grade NPI fell 10.56% on the month to 6,300 mt in Ni content, as some #200-series stainless steel integrated plants cut production in the face of elevated inventories and subdued downstream demand. 

NPI production in China is expected to recover in March on the easing impact of coronavirus on manpower, logistics and adjuvant materials supply. Domestic NPI output is estimated to rise 2.36% from February to 43,100 mt in Ni content in March, with production of high-grade materials increasing 1.73% to 36,400 mt in Ni content, while that of low-grade materials expanding 6.02% to 6,700 mt in Ni content.

NPI producers resume operations in an orderly way and some mills under maintenance will also restart production in March. The return of some #200-series stainless steel integrated plants will lift production of low-grade NPI.

Nickel sulphate

China produced 29,400 mt of nickel sulphate in February, down 24.38% on the month and 30.87% on the year. This included 25,400 mt of battery-grade nickel sulphate and 4,000 mt of electroplating-grade materials. Total output in February translated to 6,500 mt in Ni content.

Logistical constraints caused by the epidemic led to the shutdowns or production curtailments at nickel sulphate producers last month. That, coupled with fewer working days of the month, lowered production of nickel sulphate sharply.

On the demand side, downstream consumers―producers of cathode materials and precursors did not restart production until late February.

SMM expects China’s nickel sulphate production to jump 78.02% on the month to 11,500 mt in Ni content in March.

Zinc

China’s zinc output dropped in February as sulphuric acid inventory woes, raw material supply shortages and manpower issues forced smelters to slash production.

About 453,000 mt of refined zinc was produced in China last month, down 14.3% from the revised output of 528,500 mt in January but up 7.75% from February 2019. Zinc capacity which was covered in the SMM survey remained unchanged at 6.09 million mt on an annualised basis.

Transport curbs aimed at containing the COVID-19 epidemic paralysed road transportation before the middle of February, leading to storage capacity shortages for the byproduct sulphuric acid at large and medium-scale zinc smelters who did not suspend production during the Chinese New Year holiday. Some large smelters in Shaanxi, Inner Mongolia and other regions had to curtail production last month.

Some smelters scaled back production last month due to tight supply of raw materials as logistical constraints kept them from replenishing their stocks which remained at on-demand levels ahead of the CNY holiday.

Meanwhile, delayed return of workers forced smelters in Hunan, Yunnan and other regions to remain shut for a longer period of time.  Shorter working days in February also contributed to lower monthly production figures.

China’s production of refined zinc is expected to increase to 465,100 mt in March (which has more working days), 12,100 mt higher from February, as logistics have recovered and workers return to their workplaces.

Xiangyun Feilong in Yunnan plans to step up production in March as raw material supply has recovered, while Chengzhou Mining and Metallurgy is expected to commence production at the end of this month.

Chihong Zinc and Germanium’s zinc smelter in Hulun Buir, Inner Mongolia suspended production in late February as the electrolysis system broke down, while Gansu Baohui plans to begin maintenance in the middle of March.

Lead

Primary lead output in China declined greater than expected in February, falling more than 40,000 mt from January to 214,000 mt, down 16.6% on the month and 4.9% on the year.

Lead smelters delayed their post-holiday resumption due to the COVID-19 outbreak. Major producers such as Hunan Yuteng and Yunnan Zhenxing extended their suspension after maintenance and did not recover operations until late-February. 

Some smelters cut their scheduled output for February or carried out overhauls on facilities as post-holiday transportation curbs led to supply disruption of raw materials and inventory buildup of lead ingot and by-product sulphuric acid. 

SMM estimates a rebound of close to 30,000 mt in primary lead output in China in March as suspended smelters resume from the extended holidays and contribute to output after the removal of shipment restrictions and the return of workers with the spread the virus being contained in China. Resumption of Yunnan Zhenxing and Hunan Yuteng will also support a rebound in production in March. 

Tin

China’s production of refined tin plunged in February as the COVID-19 outbreak kept most smelters shut even as some producers maintained normal operations.

SMM data showed that domestic refined tin output fell 30.4% on the month to 7,506 mt in February. Operating rates in Yunnan were higher than that in other areas as the province felt a smaller impact from the epidemic. 

While most smelters have restarted operations in March, supply shortage of feedstock tin ore drove some producers to scale back production. SMM expects China’s refined tin production in March to recover to the level seen in early January, at 10,500 mt.