Exclusive- SMM Survey: Impact on metals sectors on Hebei lockdown

SHANGHAI, Jan 11 (SMM)—North China's Hebei Province has entered "state of wartime” since January 5 to battle the new COVID-19 infections. The epicentre of the Hebei outbreak is the provincial capital of Shijiazhuang, with 11 million people under lockdown.

Since January 2, the province has reported 223 locally-transmitted confirmed COVID-19 cases and 161 locally-transmitted asymptomatic carriers. Hebei has reported 40 locally-transmitted confirmed COVID-19 cases and six asymptomatic cases in the first 10 hours of Sunday (January 10), local authorities said.

It is understood that logistics and transport have been seriously disrupted by the lockdown in Shijiazhuang. Some companies in the metals industry have suspended production more than one month ahead of the Chinese New Year, closing their doors for  “early holiday”. Also known as the Spring Festival, the Chinese New Year falls on February 12 this year.

It is reported that Chinese authorities halted public transport in Hebei on Saturday (January 9) in an effort to stamp out a new cluster of coronavirus infections. Shijiazhuang has suspended service on the city’s subway and extended the ban to all public transport.

SMM analysts speak to the China metals market on the impact on trades and production amid the transportation and logistics disruptions in Hebei.

Copper:

Xingtai and Shijiazhuang in Hebei Province are both high-risk areas for this outbreak. As Ningjin County of Xingtai is the largest wire and cable production base in northern China, its lockdown had a great negative impact on demand for copper rod. Copper rod producers using copper scrap as raw materials in Jiangxi, Henan, Hebei Langfang and Baoding told SMM that their products could not be delivered to customers due to strict restrictions on logistics and transport in Xingtai Ningjin, which led to build-up of finished product inventories at these producers. Producers in Hebei Baoding, Shijiazhuang and Ningjin suspended production, and resumption date is undetermined.

Aluminum:

SMM learned that aluminium processors in Hebei were significantly affected by the outbreak, especially aluminium rod and extrusion producers, while producers in surrounding areas are concerned about futures logistics.

The COVID-19 outbreak mainly affected transport of local pre-baked anode makers. At present, there are two pre-baked anode producers in Shijiazhuang, namely Hebei Hongke Carbon Company and Shijiazhuang Xinfeng Metallurgical Carbon Company, with a total operating capacity of about 300,000 mt. The two producers told SMM that their production has not been affected yet, but transport of raw materials and products was suspended. The two companies mainly supply pre-baked anode to aluminium plants in Inner Mongolia and northwest China. These aluminium plants had stockpiled sufficient raw materials before, and thus short-time suspension of logistics will not affect their production.

Zinc:

The COVID-19 outbreak in Hebei had relatively small impact on galvanising as there are fewer galvanising plants in Hebei. Some galvanising plants planned to suspend production and start the Chinese New Year holiday in the near future.

Lead:

Lead-acid battery makers in Hebei halted production during January 6-9, and transport of lead ingots and batteries suspended, which lowered daily lead consumption by 300-400 mt. No secondary lead smelters have suspended production yet, but logistics restrictions affected their procurements of battery scrap. Some smelters planned to begin the CNY holiday in advance.

It is worth noting that Shijiazhuang borders Baoding and Xingtai. Baoding is a concentrated area of ​​lead-acid battery makers and secondary lead smelters.

Steel:

According to SMM steel research, construction of Beijing and surrounding construction sites remains as per normal, and no suspension notice has been received. However, due to the impact of the outbreak at Shijiazhuang and Xingtai, sentiment at the construction sector has weakened. In addition, spot transaction of rebar has also deteriorated on January 6.

Nickel

The recent cold weather and the COVID-19 outbreak in Hebei affected transportation of raw and supplementary materials of NPI plants in north China, which led to slight rises in their production costs.  

SMM expects China’s NPI output to fall 3.1% on the month to 36,200 mt Ni in January. Output of high-grade NPI is likely to shrink 5.6% to 28,200 mt Ni, while that of low-grade NPI to rise 6.8% to 8,000 mt Ni. Low inventories of raw materials and high prices of nickel ore are likely to prompt NPI plants to trim output. Besides, the approaching Chinese New Year holiday and a resurgence of COVID-19 cases in some Chinese provinces will affect transportation of feedstock and supplementary materials.