Exclusive: China's base metals output in February

SHANGHAI, Mar 9 (SMM)—This is a roundup of China's base metals output in February 2021, from an exclusive survey of key producers by SMM analysts.

Copper

An SMM survey showed that China produced 821,800 mt of copper cathode in February, rising 2.89% from January and 20.31% from a year ago, as some copper smelters recovered from maintenance.

Domestic sulphuric acid prices continued to rise in February, which eased the pressure brought by sliding copper concentrate TCs. Some smelters reduced output last February due to shortages of storage capacity for sulphuric acid, which contributed to the year-on-year rise in copper cathode output. However, smelters faced great pressure of finished products inventory as hiking copper prices after CNY deterred downstream users from buying.

According to smelters’ production schedules, SMM expects China’s copper cathode output to increase 4.01% on the month and 14.94% on the year to 854,800 mt in March. For the first three months of 2021, output is likely to total 2.48 million mt, up 14.99% from the same period last year.

Alumina

China’s alumina output stood at 5.86 million mt in February. This included 5.65 million mt of metallurgical-grade alumina, with the daily output up 9.89% on the month and 9.16% on the year to 201,700 mt. Operating capacities in north China increased in February from a month ago.

As of early March, the operating capacity of metallurgical-grade alumina stood at 71.82 million mt/year. SMM sees output of metallurgical-grade alumina at 6.25 million mt in March (31 days), with the daily output largely unchanged on the month at around 201,500 mt.

Aluminium

China’s primary aluminium output rose 5.23% year on year to 3.02 million mt in February (28 production days), showed an SMM survey. As of early March, there was 39.68 million mt among 43.54 million mt per year of existing primary aluminium capacity in operation, while operating rates across Chinese primary aluminium producers stood at 91.1%. Daily output rose 600 mt from January to 107,700 mt as Yunnan Shenhuo, Hongtai and Inner Mongolia Chuangyuan Phase II continued to release output. The proportion of aluminum water came in at 59.3%, down 4 percentage points month on month.

As new aluminium projects will continue to release output, SMM expects China’s primary aluminium output to stand at 3.34 million mt in March, while import at about 150,000 mt as the import arbitrage window opened in end February. Domestic aluminum social inventories are likely to stand at about 1.35 million mt at the end of March as downstream demand improves.

Nickel

China’s refined nickel output rose 5.33%, or 692 mt, from January and 1.7% from a year earlier, to 13,700 mt in February. The Gansu smelter and Xinjiang smelter produced 12,600 mt and 1,073 mt of refined nickel respectively, while other smelters remained suspended.

SMM expects China’s refined nickel output to rise to 14,200 mt in March due to longer operating days of the month. In addition, the Tianjin smelter has started to resume production, while the Jilin smelter is likely to restore its refined nickel line at the end of March.

Nickel pig iron (NPI)

China’s NPI output shrank 1.88% from January to 37,800 mt Ni in February. This included 31,400 mt Ni of high-grade NPI, down 0.58% on the month, and 6,500 mt Ni of low-grade NPI, down 7.76% month on month. Shorter operating days of February led to the decline in high-grade NPI output in February, while suspension of low-grade NPI plants in east China resulted in the fall in low-grade NPI output.

SMM expects China’s NPI output to increase 5.01% on the month to 39,700 mt Ni in March. Output of high-grade NPI is likely to rise 2.87% on the month to 32,300 mt Ni due to longer operating days, while that of low-grade NPI to gain 15.4% to 7,500 mt Ni as some integrated #200 stainless steel mills restart production.

Nickel sulphate

China’s nickel sulphate output declined 5.86% from January but surged 132.91% on the year, to 68,500 mt or 15,100 mt in nickel content in February. This included 60,900 mt of battery-grade materials and 7,600 mt of electroplating materials. Output slid at some nickel salts plants in February due to the Chinese New Year (CNY) holiday or shortages of raw materials. A large nickel salts plants which had previously suspended its nickel sulphate lines due to accidents did not recover till the end of February. 

SMM expects China’s nickel sulphate output to increase 15.19% from February and 65.22% from a year ago to 17,400 mt Ni in March, as nickel salts plants have resumed production. In addition, premiums of battery-grade nickel sulphate against nickel briquette hit a new high in nearly three years as nickel prices tumbled recently, which prompted nickel sulphate downstream buyers to purchase nickel briquette.

Zinc

China's refined zinc output stood at 471,200 mt in February, falling 71,100 mt or down 13.1% on month and up 4.03% on year. For January-February, output totalled 1.01 million mt, up 3.26% from the same period last year. Zinc smelters produced 71,700 mt of zinc alloy in January, down 8.72% from the previous month. Among them, mineral zinc output stood at 394,745 mt in February, and secondary zinc output stood at 15,750 mt.

SMM survey showed that China's refined zinc output in February basically met expectations. The decline in domestic refined zinc output in February was mainly due to the seasonal shutdown or production control of smelters during the CNY. In addition, February only has 28 days and the production of other refineries that were in maintenance or resumed production from maintenance was basically in line with expectations.

The domestic refined zinc output in March is expected to increase 48,100 mt to 519,300 mt, which has not yet recovered to the January output level. According to SMM survey, some refineries that were suspended and took maintenance during the CNY will gradually resumed production in March, and the number of days in March increased by 3 days from the previous month. The total increase in refined zinc production was in line with expectations, but the reason why the production did not return to the January level was due to maintenance of refineries in Gansu, Xinjiang, Hunan and Yunnan regions. At present, TCs for domestic zinc ore are still at a low level. Operating rates of smelters under low profits will be monitored in the following weeks.

Primary lead

SMM data showed that China produced 250,500 mt of primary lead in February, down 4.14% from January, and up 17% from a year ago. For January-February, output rose 8.69% from the same period last year. Production capacities of enterprises involved in the survey will stand at 5.48 million mt in total in 2021.

SMM survey showed that February coincided with the traditional Chinese New Year holiday, and most small and medium smelting companies took advantage of the trend to take maintenance or holiday. As February only has 28 days, the normal production time of smelting companies was shorter than usual, leading to a decline in the monthly output. Compared to February (the month of the CNY) of the previous year, the general MoM reduction ranged from 30,000 to 50,000 mt, and this year it was only a reduction of more than 10,000 mt. On the one hand, some primary lead companies expanded their production capacity compared to previous years. On the other hand, some medium and large companies did not restricted their production due to the CNY or the reduction in working days. At the same time, companies such as Xinling, Copper Crown, and Mengzi basically resumed normal production after completing the maintenance in February. Therefore, the output of primary lead in February decreased as usual in previous years, but the rate of decline narrowed.

The smelting enterprises will resume their normal working days in March, and most of the companies' production plans will be adjusted upwards compared with February. At the same time, the companies that took maintenance or were on holiday during the CNY will gradually resume production in March. The output of Henan Minshan, Hunan Jingui, Huaxin, and Shuikoushan Zhihui have all increased, prompting the output of primary lead to rise sharply in March. SMM expects China's primary lead output to increase over 10,000 mt to 288,700 mt in March.

Secondary lead

SMM data showed that China produced 218,000 mt of secondary lead in February, down 33.43% from January, and up 506.31% from a year ago. For January-February, output surged 235.52% from the same period last year.

SMM survey showed that most of the secondary lead smelting enterprises stopped production on holidays since February. Therefore, the output of secondary lead in February decreased from the previous month. However, at the same time, there are concerns that workers' resumption of work after the holiday is limited due to the prevention and control of the pandemic. Some secondary lead refineries kept normal production during the CNY this year, especially the newly expanded enterprises in Anhui that started production at the end of last year, such as Tianchang, Camel, Chaowei, etc. In January-February last year, when the pandemic was most severe, most of the secondary lead refining companies stopped production. Therefore, secondary lead output in February this year and the cumulative secondary lead output from January to February both increased significantly YoY.

Most secondary lead refineries have resumed work and production in March, and only a few secondary lead refineries such as Guangdong Xinsheng Environmental Protection, Inner Mongolia Senrun and Jiangxi Qijin took maintenance and delayed resumption of work. SMM expects China's secondary lead output to increase over 120,000 mt to 338,300 mt in March. What should be monitored is that the refining enterprises in Taijiang area of Guizhou are affected by the government's environmental protection control, and the resumption of work is also hindered. In addition, Shandong Zhongqing started the two-week maintenance at the end of February.

Tin

China's refined tin output stood at 11,829 mt in February, down 25.45% on month.

Most smelters stopped production and had a holiday during the CNY holiday in February, while some enterprises in Yunnan, Inner Mongolia and Zhejiang kept production, and some smelters in Jiangxi and Guangdong even stopped production and resumed production until early March, so the refined tin output in February showed a large decline month on month. Some smelters have not resumed normal production in March due to equipment maintenance, slow return of workers and other factors, and it is expected that the output will be slightly affected. China's refined tin output is expected to increase to 15,000 mt in March.

Magnesium

China’s magnesium ingot output stood at 71,401 mt in February, SMM data showed. Magnesium prices rose before falling in February, and most of the magnesium plants kept stable production. They cleared inventories actively to reduce the risk of inventory buildup after CNY, and raised the proportion of orders for future delivery.

Magnesium prices dropped in March amid rising spot supply. Producers are likely to maintain steady production in March due to the relatively high magnesium prices. In addition, some plants have restarted production recently. China’s magnesium output is expected to rise slightly month on month in March.

Silicon

SMM data showed that China's industrial silicon output stood at 202,000 mt in February.

The output in Xinjiang, the main production area, decreased more than 10,000 mt from January due to power station maintenance in February, and the seasonal production capacity of Yunnan and Sichuan provinces decreased by nearly 9,000 mt month on month. In addition, almost all production capacity in Guizhou and Guangxi provinces was suspended in early February due to rising electricity prices. The production capacity supply in areas without power supply restrictions increased slightly from the previous month. For example, silicon plants in Shaanxi and Hunan increased or resumed production due to relatively high silicon prices and improved profitability. Due to their small production capacity, the overall supply supplement was limited.

It is still in the dry season of Yunnan and Sichuan now, which are the main producing areas. It is expected that the supply in the southwest producing areas will keep stable in March. The Mengxi Silicon Plant in Inner Mongolia stopped production in early March and its output decreased month on month. The main increase in the supply of industrial silicon nationwide is in the northern region, mainly due to the increase in the operation load of the silicon plants after the completion of the Xinjiang power plant maintenance. SMM expects China's industrial silicon output to stand at 210,000-220,000 mt in March.

Silver

According to SMM survey, domestic silver output stood at 1193.3 mt in February.

Silver prices fluctuated sharply since the second half of last year, and there have been several arbitrage opportunities for export ratios that widened the price difference between the SHFE and LME silver. Most domestic manufacturers with export quotas participated in the large-scale production of silver ingots for export. Although export ratio recovered at the beginning of this year, there were also several very short-term arbitrage opportunities. Therefore, operating rates of smelters with export quotas were higher than other smelters. The competition for silver-containing materials, including anode slime, became increasingly fierce. The silver-containing materials supply became tight. Small and medium-sized smelters cannot purchase silver-containing materials and the stock of silver-containing materials is not enough to run the furnaces, leading to production cuts and suspension of some plants.

In addition, some manufacturers such as Yunxi and Gejiu Lianxing took the opportunity to turn into maintenance during the CNY in February. It is expected that the silver produced by manufacturers with export quotas for export will be freshly released in March. Coupled with the resumption of production by some manufacturers, China's silver output is likely to increase.