Exclusive: China's metals output in June

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

Copper cathode

SMM data showed that China’s copper cathode output stood at 829,300 mt in June, down 2.4% month on month, but up 9.2% year on year.

Domestic smelters remained in intensive maintenance in June, leading to a continuous declie of output of copper cathode. The decrease mainly came from Southwest Copper, Chifeng Jinfeng, and Yuguang Gold & Lead. On the other hand, the decrease volume narrowed as Xiangguang and Jinlong resumed production from maintenance. There were news that some smelters were purchasing large amounts of copper scrap in the market, and the scrap supply was tightened, resulting in a slight drop in copper scrap processing fees, but smelters could still make profits. At the same time, the output of overseas newly expanded concentrate production capacities gradually increased, and TCs for spot copper concentrate kept rising, even heard to reach $50/mt. Smelters maintained high operating rates amid relatively looser concentrate and scrap supply.

Many smelters will continue the maintenance in July, but most smelters have adequate scrap stocks, and only 18,000 mt of output is expected to be reduced. Smelters’ output is expected to stay high in Q3 amid continuously rising TCs and high sulphuric acid prices. SMM predicts that domestic copper cathode output in July will be 851,000 mt, an increase of 2.6% month on month and up 13.5% year on year. SMM estimates output to total 5.89 million mt from January to July, a year-on-year increase of 13.6%.

Alumina

SMM data showed that China’s alumina output was 6.12 million mt in June, including 5.91 million mt of metallurgical grade alumina. The daily average output of metallurgical grade alumina was 196,800 mt, down 1.73% on the month but up 7.38% on the year. China produced 35.33 million mt of metallurgical grade alumina from January to June, a year-on-year increase of 8.25%. Due to the shortage of ore in Henan and Shanxi and the general rise in coal prices across the country, the operating capacity in the northern regions decreased slightly from the previous month. The capacity in the southwest regions continued to increase on the month, with the output of Guangzhou Aluminium and Chongzuo Longzhou going up. On the demand side, China's aluminium output was 3.22 million mt in June. The net imports of alumina is estimated to be around 300,000 mt, and China’s alumina surplus was about 12,000 mt in June.

As of early July, China's metallurgical grade alumina production capacity was 71.67 million mt/year, with the existing capacity increasing by 88.60 million mt/year. The capacities in southwest regions continue to grow in June, and the operation fluctuations in northern alumina plants is worth attention. Ore supply loosened after the 100th anniversary of the founding of CPC, but the rising coal prices may bring about higher cost pressure. The output of metallurgical grade alumina in July (31 days) is expected to be 6.09 million mt, and the average daily output will rise slightly.

Aluminium

China produced 3.22 million mt of aluminium in June, up 7.09% on the year. The daily output averaged 107,200 mt, up 300 mt/day on the month. The output totalled 19.47 million mt from January to June, an increase of 8.1% on the year. The production resumption of aluminium in Yunnan was slow in June, and the production in Gansu and Henan gradually recovered. At the same time, some places in Guizhou saw slight reduction in aluminium production. China's operating aluminium capacity stood at 38.88 million mt/year in early July, while existing capacity stood at 43.8 million mt/year, leaving the operating rate at 88.8%. According to SMM survey, aluminium liquid accounted for 68.5% of China’s total aluminium output in June, basically flat on the month.

On the supply side, operating capacity continued to be slightly restored. Yunnan’s production reduction is expected to narrow, Guangxi Baikuang and other new projects will continue to be put into operation, and Qinghai Haiyuan, Shanxi Zhaofeng, Shanxian Hengkang and other aluminium plants will further resume production. The monthly output is expected to reach 3.33 million mt, and the import volume is expected to be significantly reduced to about 50,000 mt. At the same time, the government will release 50,000 mt of national zinc reserve. On the demand side, aluminium extrusion and other downstream industries will enter the off-peak season in end-Q2. Domestic social inventory of aluminium fell first and then increased within the month, and started to accumulate in the second half of the month. The inventory in end-June is estimated to be 850,000 mt, and the consumption growth rate has dropped to -3.37% year-on-year.

Refined nickel   

The national refined nickel output increased 1,833 mt or 14.75% month on month to 14,300 mt in June, and operating rates stood at 65%. Gansu smelter recovered from maintenance, and slightly increased production to complete the semi-annual output plan. Jilin smelter reached full production in June, and the output was also higher than the previous month. The output of Xinjiang smelter declined slightly, and the reduction is planned to be made up in July.

Output of refined nickel is expected to stand at 13,500 mt in July 2021, mainly because Gansu smelter will return the production to the normal level, and the output may drop by nearly 1,000 mt. Therefore, the national refined nickel output is expected to be lower on the month in July.

NPI

Domestic NPI output increased by 9.27% month on month to 39,000 mt (Ni content) in June 2021. Output of high-grade NPI rose 9.3% to 32,100 mt in metal content, while that of low-grade NPI rose 8.99% to 6,800 mt in metal content. Operating rates of high-grade NPI plants went up, as some suspended production lines were recovered amid high demand, rising prices, and wider profits. At the same time, new production lines were put into operation in south, east, and north China. Low-grade NPI output increased on the month. Although a 200-series stainless steel plant in south China completely switched to normal carbon production in June, the increase in the output of the 200-series stainless steel plant in east China was more obvious.

National NPI output in July is expected to increase by 9.04% month on month to 42,500 mt in Ni content. The output of high-grade NPI is expected to rise to 34,300 mt in metal content in July amid more released new capacities, and the output of low-grade NPI is expected to be 8,200 mt in metal content with the production resumption of the 200-series stainless steel plants in south China.

Nickel sulphate

China’s output of nickel sulphate was 23,600 mt in metal content in June, or 107,600 mt in physical content, an increase of 10.05% on the month and 139.23% on the year. Among them, the output of battery-grade nickel sulphate was 100,100 mt, and that of electroplating-grade nickel sulphate was 7,500 mt. Due to the tight supply of overseas hydrometallurgical nickel intermediate products, major domestic salt factories consumed the stock of intermediate products on demand in June, and some manufacturers with shortage of raw materials switched to OEM production. The output of the large factories in north-east China returned to normal, so the output of electroplating-grade nickel sulphate produced with primary nickel increased. The output of nickel sulphate produced with recycled scraps did not increase significantly, accounting for 20.5% of the total output. The dissolution capacity of nickel briquette was gradually released in June, and the monthly consumption increased by more than 1,000 mt from May. The nickel sulphate produced from refined nickel (nickel briquette/powder) accounted for about 47% of the total output.

SMM survey showed that the prices of nickel sulphate crystal kept rising amid short supply, and nickel briquette remained high cost effective. New dissolution capacities of nickel briquette will be released in July, mainly in Jiangsu and Zhejiang, and the production capacity may increase by about 1,000-2,000 mt in Ni content. The supply of hydrometallurgical nickel intermediate products is also expected to be higher on the month. Therefore, it is expected that the national nickel sulphate production will increase by 4.09% month-on-month to 24,600 mt of metal content in July.

Stainless steel

According to SMM survey, the domestic stainless steel production in June totalled about 2.85 million mt, down 54,100 mt or 1.86% month on month but up 11.62% year on year.

The total output of stainless steel decreased in June, mainly because the overhaul and production switch of some steel plants reduced the output of the 200 and 400 series stainless steel. The output of the 200 series was about 820,000 mt, a decrease of 12,800 mt or 1.54% from the previous month, and the output of 400 series stainless steel was about 506,400 mt, a month-on-month decrease of about 70,000 mt or 12.13%. However, the output of the 300 series still increased from May and hit a record high at 1.52 million mt in June.

The total stainless steel output is expected to increase to about 3.1 million mt in July, as the plants will recover normal production after maintenance. Output of 300 series products will increase by about 120,000 mt or 7.89% month on month to 1.64 million mt; output of the 200 series will rise by 105,000 mt or 12.8% month on month after a plant in south China resumed production, and the output of the 400 series will increase by 26,500 mt or 5.23% month on month.

 Zi nc  

China's refined zinc output stood at 508,000 mt in June, up 2.69% or 13,300 mt on the month and up 9.15% on the year. Output stood at 3.01 million mt in January-June, up 4.51% year on year. Smelters in the survey sample produced 78,600 mt of zinc alloy in June, down 500 mt from the previous month.

SMM survey showed that the increase in domestic refined zinc supply in June was higher than expected. Power curtailments in Yunnan area ended around June 10, and enterprises basically returned to normal production. In addition, the regular maintenance of refineries in Gansu also accounted for the decrease in output. The increase in output was mainly due to the resumption of production after the maintenance of the refineries, and the unexpected increase was due to the faster production increase of the refineries in Shaanxi.

Except for the regular maintenance of some refineries in Yunnan, all other refineries have basically returned to normal production in July. Other increments still come from the resumption of production after the maintenance. In terms of production reduction, the maintenance of refineries in Inner Mongolia and Anhui is the main focus. However, the reduction is relatively small, so it is expected that domestic refined zinc output in July will increase 22,400 mt from the previous month to 534,000 mt. Domestic refined zinc output is expected to decrease 4,000 mt from July to 526,400 mt in August.

 Primary lead 

 China produced 282,800 mt of primary lead in June, up 7.15% from May, and up 5.13% from a year ago. For January-June, output rose 6.56% from the same period last year. Production capacities of enterprises involved in the survey stand at 5.48 million mt in total in 2021.

According to the SMM survey, the output of primary lead increased month on month in June, which was in line with the expectations of the previous report. Most primary lead smelting enterprises completed maintenance in June. For example, Henan Jinli, Yunnan Chihong, Haicheng Chengxin and other enterprises resumed their production. At the same time, the impact of power curtailment in Yunnan and Hunan was lifted, and the output of some smelting enterprises recovered. During the period, due to tight supply of lead concentrate and routine maintenance, some smelting companies slightly lowered their output, but this did not affect the overall output growth.

Output of primary lead is expected to increase steadily in July. The trend of overseas lead prices was strong, the ratio of SHFE lead to LME lead narrowed with expanding import loss, and the shipping factor did not be resolved. Lead concentrates are expected to maintain a tight balance. Output of some lead smelters in Yunnan and Hunan will drop slightly. The maintenance of Chifengshan Jinhongling and Yunnan Red Lead is about to be completed, and this part of the reduction is expected to be repaired. In addition, silver prices improved, and the silver output of some smelting companies gradually increased, which also lifted up the output of lead ingots. SMM expects China's primary lead output to increase slightly to 284,000 mt in July. 

Secondary lead

SMM data showed that China produced 319,200 mt of secondary lead in June, down 3.62% from May, and up 24.43% from a year ago. For January-June, output surged 86.83% from the same period last year.

SMM survey showed that the maintenance of secondary lead smelting enterprises went hand in hand with the resumption of production in June, and the overall output decreased month on month. Anhui Tianchang stopped production for about 15 days for maintenance and Chaowei stopped production for 20 days for maintenance. Jiangsu Xinchunxing was in a state of technological transformation, which affected the output in June. On the other hand, lead prices once fell below 15,000 yuan/mt in early June, breaking the secondary lead cost line, and some refineries turned down their production plans. At the same time, the maintenance of companies such as Anhui Dahua, Hunan Jinyi, and Jiangxi Jinyang has ended. However, due to the concentration of production reduction companies, it is difficult to reverse the overall decline in output.

Output of secondary lead is expected to rise sharply in July from the previous month. The main reason is that many smelting enterprises resume production from maintenance. Jiangsu Xinchunxing completed technical reform, Anhui Chaowei, Huaxin Avenue, Jiangxi Xinya, Yiyang Xingwang and other enterprises resumed production from maintenance. Therefore, although Anhui Tianchang, Hubei Jinyang and other enterprises are under maintenance, the overall output maintains upward trend. SMM expects China's secondary lead output to increase over 30,000 mt to 356,200 mt in July.

Tin

China's refined tin output stood at 14,088 mt in June, up 2.32% from May.

With the increase of rain in Yunnan in mid-June, the power shortage in Yunnan has been relieved, and some limited production and co-production have gradually resumed production, which led to a month-on-month increase in domestic refined tin output in June. However, the absolute amount of recovery has not yet reached April output level as companies are more cautious in stockpiling due to the tight supply of ore in Yunnan and high tin prices, which has led to an unsmooth production increase. Refinery production in other regions is relatively stable.

Except for the company’s announcement system to optimize production shutdowns in July, other refineries currently have no plans to reduce production shutdowns and maintenance. However, due to the regular maintenance of West Wuzhumuqin Silver Mining and serious pandemic situation in Myanmar, it is expected that the overall ore supply will not recover. In addition, the current tin prices have reached historical highs, and smelters are under greater pressure to increase production. It is expected that the overall output in July will hardly increase month on month.

Magnesium

China's magnesium ingot output stood at 74,600 mt in June, up 3,000 mt or 4.24% month on month and 19.1% year on year. The output totalled 435,700 mt from January to June. 65.64% of the increment in the output came from Shaanxi, and 17.42% came from Shanxi.

SMM expects the operating rates of magnesium industry to be 67.4% in June, up 4.24% month on month, and 79.26% year on year. Some large factories in the main magnesium ingot production areas completed maintenance and resumed production in June, with the output up by nearly 50% month on month. At the same time, factories in Inner Mongolia and Xinjiang have resumed work well, while some plants reduced production due to their own reasons.

As the market enters the traditional off-peak season, the plants in the main magnesium ingot production areas have scheduled intensive maintenance in July for 10-25 days, of which the output is expected to decrease 8,000 mt on the month. The total domestic output of magnesium ingots in July is approximately 66,600 mt.

Silicon

SMM data showed that China's silicon metal output stood at 230,000 mt in June, up 41,000 mt or 21.7% from the previous month. Output of the other producing areas except for Xinjiang increased in varying degrees on a month-on-month basis. China's silicon metal output stood at 1.25 million mt in January-June, up 38.1% year on year.

Silicon plants in the southwest production area resumed production due to the arrival of the flood season. Most of the silicon plants in Sichuan have started construction, while the silicon plants in Yunnan did not start production until after the Dragon Boat Festival holiday due to power curtailments. Output in Yunnan increased by only 12,000 mt in June from the previous month, down 64% year on year.

In addition to the seasonal recovery of production capacity in Sichuan and Yunnan, production in the remaining production areas mostly increased month on month under the stimulus of profit. Only Xinjiang's production slightly decreased by 2% month on month due to safety rectification. The reduced production capacity is expected to resume in early July.

Yunnan's output will gradually increase from July to August, and it is expected that China's silicon metal output will increase to around 293,000 mt in July, maintaining a year-on-year growth.

Silver

According to SMM survey, domestic 1# silver output stood at 1,182 mt (including 1055 mt of mineral silver) in June, up 0.88% from the previous month. The overall output rose slightly, in line with last month's expectation that domestic 1# silver output may still maintain a stable state in June with a slight fluctuation.

As US inflation has risen significantly from May to June, inflation will fall toward the Fed’s target. The US economy is likely to experience the fastest growth rate in recent decades in the second half of the year. Although the US index has slowed its gains in June, it may only be a callback. It is still likely to strengthen in the later period. In addition, the Fed’s interest rate decision is expected to raise interest rates, and the infrastructure plan has also reached a preliminary agreement and other factors. As a result, silver prices fluctuated robustly but obviously biased towards weakness.

Although the weakness in the market makes the market spot transactions appear relatively tepid, the impact on the production of manufacturers is still not affected by the market as a whole. Many manufacturers' substantial reduction in output was due to the maintenance in June, such as Guiyan Platinum Industry, Chifeng Shanjin Silver and Lead and other manufacturers took maintenance in June. However, manufacturers such as Gejiu Lianxing, Jiangxi Longtianyong, and Yanggu Xiangguang Copper have not finished their maintenance since May or even earlier, which continued to affect production. However, although many manufacturers have significantly reduced their supply due to production shutdowns and production cuts, the reason for the slight increase in output in June compared with May is still due to the fact that many manufacturers did not reach production at the beginning of the year before the end of June. In order to complete the plan for the first half of the year, the production was forced to increase substantially in June, such as Yuntong, Shuikoushan, Shandong Zhaojin, Zhejiang Hongda, Minshan Huaneng High-tech and other manufacturers, the output in June increased significantly in varying degrees, which also hedged against the reduction in silver supply from other manufacturers.

However, the current supply of silver-containing materials, including anode mud, seems to be still tight. Some manufacturers said that although the pricing coefficient of silver-containing materials was not low, there was still a certain profit margin for the manufacturers. Therefore, the willingness to produce in July is still very strong. As far as possible, the output will not be easily reduced. Considering that many manufacturers’ maintenance this month will have a continuation effect, production will not fully return to normal levels in July, and even manufacturers such as Jiangxi Longtianyong and Gejiu Lianxing may not be able to resume work smoothly. In addition, as July is the beginning of the second half of the year, there is a buffer effect. It is expected that China's silver output may drop slightly in July, but the overall reduction will not be too large.

Cobalt sulphate

China’s cobalt sulphate output stood at 4,967 mt in metal content in June, a month-on-month increase of 7% and year-on-year increase of 87%. As the downstream demand for ternary precursors increased, cobalt sulphate companies received more orders and scheduled more production. Some companies switched their nickel sulphate production lines to cobalt sulphate production. The demand ternary precursors will further increase in July, driving some companies to switch cobalt chloride production lines to cobalt sulphate production, and the supply of cobalt sulphate may reach a new high. SMM expects China's cobalt sulphate supply to increase 7% on the month and 62% on the year to 5,305 mt in metal content in July.

Tricobalt tetraoxide

Output of tricobalt tetraoxide stood at 7,425 mt in metal content in June, up 6% month-on-month and 51% year-on-year. The market trade of tricobalt tetraoxide was sluggish in early June, and rebounded in late June, when plants increased production. Downstream inquiries increased and prices rose in July, the production of tricobalt tetraoxide is expected to further increase. In addition, the technical debugging of some doping production lines has gradually stabilised, of which the output will increased. China’s tricobalt tetraoxide demand is expected to rise 5% month-on-month and 30% year-on-year to 7,775 mt in June,

Lithium carbonate

China’s lithium carbonate output was at 20,930 mt in June, a month-on-month increase of 0.7% and year-on-year increase of 42.3%. At the end of June, a domestic major smelter conducted the annual shut down for maintenance, which affected about 5% of the overall output. The output of new production lines in Jiangxi and Qinghai have grown smoothly, and the overall output continued to increase. The salt lake production system is about to reach its annual peak, and the suspended production lines will be resumed in July. The overall lithium carbonate output is expected to reach 22,380 mt in July, an increase of 6.4% month-on-month and a year-on-year increase of 51%.

Lithium hydroxide

China’s lithium hydroxide output stood at 14,313 mt in June, a month-on-month decrease of 5.5% and year-on-year increase of 66.4%. Jiangxi still saw increase in the output, but most large-scale smelters have stopped production for the annual maintenance until late July, so the spot supply decreased. In addition, a plant was once again suspended due to the delayed arrival of raw materials and the overhaul of the natural gas pipelines in the industry park. It is expected that the supply will be reduced to 13,960 mt in July down 3% on the month.

Ternary materials

China produced 35,640 mt of ternary materials in June, an increase of 8% month on month and 127% year on year. On the supply side, the new production lines of domestic leading material companies were put into operation, the output of high-nickel products greatly increased. Other material companies adjusted their production lines, and output of 6 and 8-series products gradually increased. On the demand side, the motive market was robust, new car models were launched, and the downstream users raised purchase volume to restock in advance for the production increase in H2 2021. The small motive market and digital market were still sluggish. However, downstream inventories decreased, and in order to deliver orders, purchases increased from the previous month.

LFP

China produced 28,810 mt of LFP in June, an increase of 5.3% month on month and 152% year on year. On the supply side, LFP companies were actively expanding production, and some of the new production lines of major factories were put into operation in June, driving up the LFP output. On the demand side, the continuous rising demand for LFP motive batteries in H1 raised the market’s overall expectations for H2. Some car companies began to stock up for the possible demand growth. At the same time, small motive market gradually entered the peak season of sales, the partial replacement of LMO and ternary battery batteries with LFP batteries drove up the demand for upstream materials. Therefore, the purchase volume went up.

LMO

China’s LMO output was at 8,870 mt in June, a month-on-month increase of 7.8% and year-on-year increase of 101.1%. On the supply side, some major LMO plants put the production lines of LMO for small motive market into operation, and the output gradually increased. On the demand side, the market demand for LMO remained divergent in June. The COVID-19 pandemic in India and the chip shortage limited end output to a certain extent. The supply of portable power source, electronic cigarettes and other 3C products weakened. The demand slightly rebounded in late June as India lifted the blockdown. The demand for power tools and electric two-wheeled vehicles increased, and the demand for ternary manganese doping rose significantly. Some downstream car companies replenished their inventories, inquiries increased, and the purchase demand rose.

Didymium oxide

SMM data showed that China's didymium oxide output stood at 6,714 mt in June, down 6.31% from the previous month. After revision, China's didymium oxide output stood at 7,166 mt in May, compared to 6,395 mt before the revision.

In terms of regions, the top five provinces with the highest output of didymium oxide in June were Inner Mongolia, Jiangxi, Jiangsu, Sichuan and Gansu. The production of enterprises in Jiangxi, Shandong, Guangdong, Hunan, and Sichuan were affected in June. Environmental inspections were a major cause. Some enterprises took routine maintenance. Some enterprises indicated that the output of oxides decreased due to the tight raw materials in the early stage.

Prices of rare earth products rose rapidly in July, and the difficulty of purchasing raw ore or scrap further increased. Sichuan and Guangdong were under pressure from environmental protection, and didymium oxide output may continue to decline. It is expected that China's didymium oxide output will stand at 6,409 mt in July.