China NPI production fell 4.5% in March

SHANGHAI, Apr 8 (SMM) –

Refined nickel

China’s production of refined nickel increased 16.03% on the month to 15,600 mt in March, to produce a year-over-year gain of 21.59%, showed an SMM survey.

A longer month and production recovery contributed to the month-on-month increase in refined nickel production. The smelter in Jilin has recovered to normal, with its capacity utilisation rate climbing back to levels seen the same period last year, while operations at smelters in Gansu and Xinjiang also are also faring well.

Smelters in Shandong and Tianjin, however, remain in low gear, as a plunge in nickel prices in March has pushed them towards the verge of losses. The two smelters use imported intermediates as raw material, but sees no near-term impact to their production given existing stockpiles.

The smelter in Guangxi keeps its refined nickel production line suspended, and is unlikely to resume it until the fourth quarter.

April is shorter than March, and China’s refined nickel output for the month is expected to dip 0.96% to 15,500 mt. Cost pressure at Chinese nickel smelters who use imported ore and intermediates as raw material is mounting, if nickel prices extend their decline and the coronavirus crisis worsens.

Nickel pig iron (NPI)

Last month, output of NPI in China extended its downtrend that began since November 2019, decreasing 4.46% from March to 40,200 mt Ni, some 12.25% lower than the same month a year ago, showed SMM data.

The decline was propelled by high-grade materials, which saw production falling 5.47% on the month to 33,800 mt Ni, as losses, ore shortages and reduced demand forced smelters to trim or suspend production. Output of low-grade NPI increased 1.3% in March to 6,400 mt Ni.

Prices of high-grade NPI have fallen below costs across all producers in China, pushing producers into negative territory. Large part of mining operations in the Philippines have been suspended in response to the government’s virus containment measures, disrupting supply to Chinese consumers this month, and nickel ore inventories at most of high-grade NPI producers in China have fallen to one to two months. Some producers suspended production after they ran out of nickel ore, and some scaled back operations or brought forward maintenance to counter raw material shortages as prices remained low. Demand for high-grade NPI, meanwhile, shrank, as stainless steel mills adjusted their consumption of raw materials including high-grade NPI and stainless steel scrap. Prices of stainless steel scrap have declined following losses in prices of pure nickel and stainless steel.

Output of low-grade NPI rose last month, as the shutdown of a producer caused by nickel ore depletion was offset by production resumption of a 200-series stainless steel mill and ramp-up of a stainless steel and low-grade NPI integrated mill.

Production of high-grade NPI in China is expected to continue to fall in April, decreasing 6.91% on the month to 31,500 mt Ni, while that of low-grade NPI will increase 4.39% to 6,700 mt Ni. That will bring the total NPI production to 38,200 mt Ni, down 5.11% from March.

Further depletion of nickel ore inventories and pessimism surrounding prices prompt high-grade NPI producers in China to deepen production cuts this month, while production recovery at some large-scale stainless steel and low-grade NPI integrated mills will boost production of low-grade NPI production.  

Nickel sulphate

China produced 47,800 mt of nickel sulphate in March, up 62.39% from a month ago but down 14.72% from a year ago. This included 42,200 mt of battery-grade nickel sulphate and 5,600 mt of electroplating-grade materials. Total output in March translated to 10,500 mt in Ni content.

The month-on-month increase was significant, as most of producers did not resume production until March. Strict virus containment measures deterred producers from recovering production in February, and operations at nickel sulphate producers and downstream consumers improved substantially in March after the outbreak in the country eased.

Last month, demand for nickel sulphate improved from February when was hard hit by the disease, but operating rates across nickel sulphate downstream consumers were lower than the same period last year.

SMM expects China’s nickel sulphate production to rise 6.24% on the month to 11,200 mt in Ni content in April.