Exclusive: China's Metals Output in August

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

Copper cathode

SMM data showed that China’s copper cathode output stood at 819,400 mt in August, down 1.3% month on month, but up 1.1% year on year.

The smelters in Fangchenggang and Wuzhou in Guangxi reduced production by about 15% in August amid the power curtailment, and some other smelters in Guangxi advanced their maintenance. The output of a smelter in north Shandong was slightly affected by the environmental protection. The production in Henan was little impacted by the power curtailment. The maintenance plans in other regions were carried out as expected.

TCs for domestic copper concentrate exceeded $60/mt, bringing higher profits to smelters. Prices of sulphuric acid remained high amid the strong overseas demand. Smelters maintained high operating rates for the high profits, and some smelters have stepped up production since August.

However, copper scrap supply in domestic market tightened, and RCs fell sharply. The RCs in some smelters even dropped below the break-even point, seriously squeezing the profits, which to some extent limited domestic copper cathode output.

Smelters’ maintenance is coming to an end in September. Only two large smelters in Guangxi will continue maintenance, with the output to be significantly affected. Some plants stepped up production in advance for the higher profits in crude smelting. However, the tight supply of copper scrap may cause some large refining smelters to slightly reduce production.

SMM predicts that domestic copper cathode output in September will be 832,300 mt, up 1.6% month on month and 4.1% year-on-year. Output is estimated to total 7.52 million mt from January to September, a year-on-year increase of 10.7%.

Alumina

China’s alumina output was 6.39 million mt in August (31 calendar days), including 6.16 million mt of metallurgical grade alumina with a daily average output of 197,000 mt, up 1.24% on the month and 6.97% on the year. The cumulative output of metallurgical grade alumina stood at 47.66 million mt from January to August, a year-on-year increase of 8.09%. The prices of alumina rose rapidly in August, encouraging alumina plants in a few areas in north China to increase production. At the same time, the alumina production capacity in south-west China was running smoothly. Overall, China produced 3.23 million mt of aluminium in August. The net import volume of alumina is estimated to be around 400,000 mt, with a surplus of around 349,000 mt in the month (1 mt of aluminium shall consume 1.925 mt of alumina).

As of early September, China's metallurgical grade alumina capacity in production stood at 71.52 million mt/year, with the existing capacity being 88.60 million mt/year. The market shall watch the intensity of output cut in Guangxi in September. The output of metallurgical grade alumina in the month (30 days) is expected to be 5.73 million mt, and the average daily output will decline slightly. In conclusion, if the output of aluminium in September is set at 3.11 million mt, and the net import volume of alumina remain unchanged at 400,000 mt, then there is likely to be a surplus of around 145,000 mt of alumina in the market (1 mt of aluminium shall consume 1.925 mt of alumina).

Aluminium

China produced 3.23 million mt of aluminium in August, up 1.13% on the year. The daily output averaged 104,000 mt, down 2,000 mt/day on the month. The output totalled 25.97 million mt from January to August, an increase of 6.80% on the year. Disruptions to the supply side continued in August. Guangxi and Xinjiang intensified production restrictions, and the aluminium production capacity previously affected by dual energy consumption control and lack of electricity did not recover. Xinheng, Hengkang and Zhaofeng resumed production with a combined capacity of only 150,000 mt/year. China's operating aluminium capacity stood at 38.15 million mt/year in early September, while existing capacity stood at 43.75 million mt/year, leaving domestic operating rate at 87.2%. According to SMM survey, aluminium liquid accounted for 66.7% of China’s total aluminium output in August, a decrease of 0.3 percentage points from last month amid seasonal low.

The supply side is unlikely to see increase in operating capacity in September. Although Yunnan has recently organized a power-related meeting to solicit the opinions of aluminium companies on the later implementation of electricity prices, SMM believes that due to the dual control of energy consumption, local aluminium companies will not rush into resuming operation without the support of guaranteed power supply. At the same time, the power limit in Guizhou and Guangxi has intensified again. It is expected that aluminium output will continue to fall to 3.11 million mt in September. On the demand side, the demand of downstream aluminium processing sector such as building materials will pick up slightly from the previous month due to traditional high, but may drop slightly year-on-year. Domestic inventory is likely to remain at a low level of 740,000 mt in September, and the consumption growth in the month is expected to decrease by 1.68% year-on-year.

Primary lead

China produced 276,900 mt of primary lead in August, down 0.75% from the previous month and 2.69% on the year. Cumulative output in January-August rose 5.44% from the same period last year. Production capacities of enterprises involved in SMM survey stand at 5.48 million mt in total in 2021.

According to SMM research, the impact of power rationing in Yunnan, Henan, and Hunan continued in August, and major companies took turns to restrict production as required. During this period, smelters that received power curtailment in July resumed normal operation, such as Yunnan Chihong, Henan Minshan, Shibin. Nonetheless, overall output recorded a decrease as smelters like Henan Jinli, Wanyang, Xinling were still restricted in terms of power utilisation, and Yunnan Mengzi was under maintenance. And the resumption of reduction at Chifeng Shanjin was not enough to make up for the overall decline in output.

Looking forward, smelters influenced by electricity curtailment in August will gradually recover in September. At the same time, Yunnan Mengzi, Hunan Yuteng and Anhui Copper Crown are expected to yield more output after the overhaul is completed. On the other hand, Xing’an Silver and Lead in Inner Mongolia will start routine maintenance in the month. On the whole, the increase and decrease in output in September will largely be offset, resulting in slight increase from the previous month. SMM expects the lead output in September to reach 278,000 mt.

Secondary lead

China produced 407,900 mt of secondary lead in August, up 11.12% from July, and up 46.33% on the year. Cumulative output in January-August surged 69.97% from the same period last year. Meanwhile, China produced 394,900 mt of secondary refined lead in August, up 13.37% month-on-month, and up 45.41% from a year ago. Cumulative output from January to August advanced 61.31% on the year.

According to SMM, the output of secondary lead rose as scheduled in August. On the one hand, Jiangsu Xinchunxing carried out technology upgrade;  the operation of Anhui Avenue was stable; Tianjin Dongbang installed new equipment after the production ramp; Anhui Tianchang, Jiangxi Qijin further recovered after maintenance was completed in July. On the other hand, plants like Inner Mongolia Jinfan, Henan Yongxu, and Ningxia UBS added new output significantly after their newly-expanded capacity was put into production, and the output Hubei Xinzi also climbed. In summary, the output of secondary lead this month rose more than expected, and the monthly output exceeded the 400,000 mt mark, a record high.

The output yielded by newly-expanded capacity of secondary lead companies is expected to climb further after they are put into production. For example, Henan Yongxu and Guizhou Qizhen (Guizhou Fire Kirin) are expected to increase their output further in September after expanded capacity was put into production. Also, the phase I project of Anhui Huabo is expected to enter the preparation period in September, involving an annual production capacity of 120,000 mt. However, on the other hand, lead prices have gradually broke the breakeven point of secondary lead at the beginning of the month. This, combined with environmental protection inspectors in Guangdong, Hubei and other places, is likely to cause more output reductions among smelters if losses of secondary lead further expanded. Thus, output of secondary lead in September is likely to fall by more than 10,000 mt on the month.

Zinc

Domestic zinc output stood at 508900 mt in August 2021, down 1.22% or 6300 mt on the month and 0.04% on the year, according to SMM. Cumulative output in January-August totalled 4.042 million mt, a year-on-year increase of 4.47%. Alloy output at domestic zinc smelters in SMM’s survey sample was 75,500 mt in August, up 80 mt on the month.

SMM survey showed that the actual decrease in domestic zinc output in the month was less than expected. The main reason was that the decline in output as a result of power restrictions in Guangxi and Yunnan has fell short of expectations. Among them, the production of most smelters in Yunnan has basically returned to normal except for a few that are still under the impact of power curtailment. In mid-to-late August, the regional production limit in Guangxi has narrowed from 50% to about 10-20%. Meanwhile, output changes in other places were basically in line with estimate, such as the planned reductions due to routine maintenance of large smelters in Hunan and Gansu.

In September, the production activity in Yunnan was stable with limited impact of power curtailment. In addition, some smelters in Yunnan have received a notice that there were no power restrictions before September 10. The current power curtailment in Guangxi is still exerting influences, but at a less severe extent when compared with August. Power curtailment in Hunan has basically ended, and many secondary zinc smelters near Luxi County have returned to normal. While places like Gansu, Inner Mongolia will also contribute to the rising output after resuming production following the completed maintenance. As such, output in China in September is expected to add 11,800 mt on the month to 520,700 mt.

For statistics of October, only smelters in Jiangxi have scheduled to carry out maintenance in this period so far. Guangxi Yusheng has planned to commence production in October-November. SMM will continue to track the market production profile.

Tin

The output of tin in August stood at 13,660 mt, an increase of 20.63% from July, and basically returned to the level in June. The month-on-month increase was mainly rendered by the resumed production after routine maintenance across smelters in Yunnan drew to an end. However, the growth was limited as tin ore processing fees climbed in Yunnan after SMM studies the local production situation. Several smelters suspended production for maintenance for a few days due to power failure. In Mengzi, the supply of tin ores in the northern region increased month-on-month after Yinman Group resumed production, which also pushed up the capacity utilisation rate of local tin smelters. In Jiangxi, local smelters reported rising raw material prices and risks of restocking on high prices. Companies have slightly lowered their production schedules in August to reduce inventory of finished products and mitigate risks. Smelters in Guangxi continued to be affected by production restrictions, and capacity utilisation rate was at a low level.

Looking forward, smelters in Yunnan currently have no plans to increase production further, and the production schedule is expected to remain flat in September. Guangxi is still troubled by power restrictions, but the impact of the power cut will be weaker than in August. It is expected that the output of tin ingots in Guangxi will recover steadily from the previous month. In summary, SMM expects domestic tin production in September to be 13,850 mt.

Refined nickel

The domestic refined nickel output stood at 13,713 mt in August, up 19.28% or 2378 mt month-on-month. Operating rate stood at 67%. The increasewas mainly contributed by smelters in Gansu that resumed production after overhaul, and the smelter was even running at full capacity. The output in Xinjiang also showed a seasonal recovery in growth rate.

Output of refined nickel is expected to stand at 14,000 mt in September, 2021. A smelter in Jilin region has planned to conduct overhaul and suspend production, which will result in some reductions in output. While the production in other regions was stable.

NPI

Domestic NPI output fell 3.83% month-on-month to 40,300 mt in metal content in August. Output of high-grade NPI decline in 1.64% to 33,100 mt in metal content. Output of low-grade NPI plummeted 12.78% to 7,200 mt in metal content in the month. In August, some production lines of some iron plants that were previously under maintenance gradually released production capacity, driving up output. However, the electricity curtailment policy continued to bring down the output in Guangxi. Some integrated steel plants have lowered raw material output on the requirement of production reduction policies, and the output of ferronickel fell as well. What’s more, the grade of high-grade NPI produced by most iron plants was lower than before due to poor grade of nickel ore, which also contributed to the decline of ferronickel output.

Domestic NPI output in September is expected to fall by 7.8% month on month to 37,200 mt in Ni content. The output of high-grade and low-grade NPI is likely to stand at 30,500 mt and 6,800 mt in metal content, respectively. It is expected that due to the further implementation of the stainless steel production restriction policy in September, the output of ferronickel will further decline. This, combined with the rainy season in the Philippines and tight in-plant inventory of nickel ore, is likely to push down production schedules at mills for sustainable operation.

Nickel sulphate

China’s output of nickel sulphate was 128,000 mt or 28,200 mt in metal content in August, up 16.39% on the month and 111.7% on the year. Among them, the output of battery-grade nickel sulphate was 26,500 mt in Ni content, and that of electroplating-grade nickel sulphate was 1,700 mt in Ni content. In terms of the raw materials for the nickel sulphate production in August, self-dissolved nickel briquette and powder accounted for 48%, virgin materials (MHP/MSP/high-grade nickel matte) accounted for about 27%, scrap materials accounted for about 18%, and the remaining was crude nickel sulphate. According to customs data, the imports of intermediate products stood at about 8,000 mt in metal content in July, a significant increase on the month. The imports are expected to rise further in September. The dissolution of nickel briquette also increased in August, and some manufacturers said they were planning new dissolution lines to increase the output in September. Domestic nickel sulphate output is expected to increase 2.03% on the month and 107.54% on the year to 28,800 mt in metal content in September.

Stainless steel

According to SMM survey, the domestic stainless steel output in August totalled about 2.82 million mt, down 103,000 mt or 3.53% month on month but up 2.19% year on year. China’s output of stainless steel totalled 22.53 million mt in January-August, an increase of 22.65% year on year.

The electricity curtailment policy in Guangxi led to a decline in the total local output of stainless steel in August, where the output of 200 and 300 series products both dropped. The output in other regions stood stable.

The production restrictions will be strengthened in September, and Guangxi requires that the local output in September should not exceed the 70% of the average monthly output in the first half of 2021. Therefore, the stainless steel output is expected to decline 240,000 or 9% on the month in September, a decrease of 7.6% on the year. 200-series output will fall 89,000 mt to 744,000 mt, 300-series will decline about 102,000 mt to 1.37 million mt, and 400-series will drop about 52,000 mt to 457,000 mt. The total output of stainless steel is expected to stand low as the production restrictions will extend to November.

The overall operating rate of stainless steel plants is estimated to be 84% in September, close to that during the CNY holiday, and at a lower level than the same period in previous years.

Magnesium

China's magnesium ingot output stood at 61,500 mt in August, down 1.98% month on month but up 7.31% on the year. The output totalled 559,900 mt from January to August, a year-on-year increase of 8.96%.

According to SMM research, the ingot output in Shaanxi accounted for 61% of the total national output in August, and Shanxi's magnesium ingot output accounted for 22%.

Operating rate of magnesium industry stood at 56.75% in August, down 1.98 percentage points month on month and 9.13 percentage points year on year.

The overall operating rate declined due to the intensive maintenance in major production areas and the production cut or suspension under the dual control of energy consumption.

According to the current plant production schedule, the main production areas are expected to resume normal production after the traditional maintenance season in September, while the dual control of energy consumption and coke oven transformation will continue to affect the production of some magnesium plants. The total output of magnesium ingots is expected to rebound slightly on the month to around 63,000 mt.

Industrial silicon

SMM data showed that China's silicon metal output stood at 277,000 mt in August, up 2.0% month on month and 38.1% year on year.

The output increment was mainly contributed by the higher production capacity in Yunnan and the resumed capacity after maintenance in Chongqing. The output in Xinjiang was largely stable.

The output in Sichuan silicon plant declined slightly under the environmental protection inspections, and the production in Guangxi was cut down due to the power curtailment. Output in Xinjiang, Qinghai, Heilongjiang and other regions also declined amid more maintenance.

The national output of industrial silicon is expected to hit a new high at 301,000 mt in September, as the monthly production capacity in Xinjiang is expected grow.

Polysilicon

China’s polysilicon output hit a new high at 43,100 mt in August, up 3.9% on the month and 62% on the year.

The increment was mainly contributed by the resumed production from maintenance in Xinjiang, Inner Mongolia, and other regions.

Silicon supply turned tight again with the expanded downstream production of silicon wafer.

Most silicon plants will maintain current production. However, some plants in Xinjiang, Inner Mongolia, Qinghai, and other regions may slightly reduce production due to the strict local power curtailment and energy consumption restrictions.

SMM expects the output of polysilicon to increase further and set a new high around 43,600 mt in September, with the increment from the resumed production capacities after the maintenance and technological transformation.

Praseodymium-neodymium oxide

China's output of praseodymium-neodymium (Pr-Nd) oxide in August 2021 stood at 5,721 mt, down 4% from a year earlier.

Production in Sichuan was in large-scale reduction or suspension in August amid the environmental protection inspections, and the Pr-Nd oxide output in Shandong fell 28.6% from July for the same reason. The Pr-Nd oxide output in Guangdong declined 33% on the month due to the tight rare earth ore supply. The output in Inner Mongolia dropped 3.5% owing to the maintenance or relocation of several major separation plants.

With the outbreak of the civil war in Myanmar, the market's expectations for the tighter supply of rare earth ores have increased, and the separation plants using Myanmar ores in south China may reduce production. The current round of environmental protection inspections will extend until late September, and China’s output of praseodymium-neodymium oxide is expected to stand at a low level throughout the year of around 5,600 mt in September.

Praseodymium neodymium metal

SMM data showed that China's praseodymium neodymium (Pr-Nd) metal output stood at 5,470 mt in August.

Most Pr-Nd metal manufacturers in Inner Mongolia are OEMs, and the local output declined slightly in August. Pr-Nd metal manufacturers in Sichuan mainly sell through long-term orders, and the output declined significantly due to the shortage of raw materials.

The demand of Pr-Nd metal is expected to strengthen in September with the upcoming peak season, but the output may only increase slightly due to the tight supply of raw materials.

Note: SMM has released Chinese Pr-Nd metal output since September. SMM surveyed 31 rare earth smelting companies in August, covering over 95% of domestic total capacity. The number of companies in SMM survey will be continuously updated in the future.

Ferromolybdenum

China produced 16,080 mt of ferromolybdenum in August, up 15.64% on the month, but down 2.67% on the year. The total output from January to August in 2021 was 132,344 mt.

The output declined as the central environmental protection inspection team has been staying in Liaoning , a major ferromolybdenum production province in China where some plants maintained operating rates around 60%, from late July to end-August. In addition, the plants seriously damaged in the floods in Henan on July 18 did not recover production until recent days, which also affected the output in August.

SMM learns from the market that the ferromolybdenum output is expected to further decrease in September, as China Molybdenum’s ferromolybdenum plant will suspend production for maintenance around September 20, and the central environmental protection inspection team will be arrived in Liaoning again. Some market participants predict that China’s ferromolybdenum output in September will decrease by about 5% on the month.

1# Silver

Domestic 1# silver output stood at 1245.259 mt (including 1103.619 mt of mineral silver) in August, up 4.16% from the previous month, which is basically in line with SMM estimate in July. The recent US non-farm readings were generally below expectation. Specifically, August non-farm payroll report in the US increased by 235,000, far less than the 733,000 estimate, marking the slowest increase since January, 2021. The unemployment rate in August stood at 5.2%, in line with market expectations and slightly higher than the previous reading of 5.4%. Average hourly wages continued to improve in August, rising by 0.6% month-on-month, exceeding market expectations of 0.3%. Market news, that has held gold prices firm, shall also support silvers prices to some extent. Silver prices rebounded slightly in August, but with limited upside room.

Volatility in silver prices is likely to stay in the short term, even to a wilder degree under the influence of sharp fluctuations in US dollar index. Although the market volatility has affected the spot trading to some extent, the manufacturers’ production is still not affected by the market as a whole. At present, the increase or decrease in the output of many manufacturers is mainly due to the overhaul or the resumption of production after the overhaul. For example, decrease in output was more significant at Shaanxi Nonferrous Metals and Mengzi Smelter who started maintenance in the month, and Guiyan Platinum that experienced production disruptions. Meanwhile, manufacturers such as Gejiu Lianxing and Jiangxi Longtianyong have not completed their overhauls since May or even earlier, such continuity also affected the output. However, more manufacturers have increased their output after the overhaul and resumption of production in August. Manufacturers such as Yunnan Tin, Chifengshan Gold, Silver and Lead, and Zhongyuan Gold, as well as Jinlong Copper, Shandong Gold and Silver Nonferrous, have also increased their output to varying degrees this month, which also hedges against fall in output from other silver manufacturers. As such, the overall output has recorded a slight increase stead of decline. As silver prices become firm, the current supply of silver-containing materials, including anode mud, is still tight. The pricing coefficient continues to rise. Domestic silver output in September is likely to remain unchanged as a whole with mild fluctuations.

Cobalt sulphate

China’s cobalt sulphate output stood at 5,510 mt in metal content in August, a month-on-month increase of 3% and year-on-year increase of 51%. The production capacities of cobalt sulphate in some enterprises expanded, and some enterprises applied more self-produced cobalt sulphate to the ternary precursor production. The overall cobalt sulphate supply increased in August. The postponed purchase of cobalt sulphate by downstream ternary precursor companies dragged down the prices, and the stocks of intermediate products were low. Some companies have planned to reduce the operating rate in September. SMM expects China’s cobalt sulphate output at 5,400 mt in metal content in September, down 2% month on month, but up 38% year on year.

Tricobalt tetraoxide

Output of tricobalt tetraoxide stood at 7,085 mt in August, up 2% month on month and 11% year on year. The output in Zhejiang increased slightly due to the higher yield of new high-voltage production lines. The demand by downstream 3C industry weakened, and the lower purchase of small orders dragged down the prices. Tricobalt tetraoxide was mainly traded for long-term orders, and stocks of intermediate products were low. Most tricobalt tetraoxide producers will lower the operating rates of tricobalt tetraoxide. Output in September is expected to fall 4% on the month but increase 6% on the year to 6,830 mt.

Lithium carbonate

China’s lithium carbonate output was 19,920 mt in August, a month-on-month increase of 7% and year-on-year increase of 19%. The production in Qinghai resumed, where the output increased 3% on the month to 5,420 mt. The production of some plants in Jiangxi was restricted by the shortage of raw materials, but some plants resumed production from July’s maintenance, and the overall output increased by 6% to 6,950 mt. The production in Sichuan and some other regions also stood low due to the shortage of spodumene, while the OEM output made up the void in market supply, and the output rose 5% to 9,050 mt. In September, the rising demand by LFP sector drives up the prices of lithium carbonate, and smelters gradually expanded production. Lithium carbonate output is expected to stand at 20,875 mt in September, a month-on-month increase of 5% and year-on-year increase of 31%.

Lithium hydroxide

China’s lithium hydroxide output stood at 13,960 mt in August, a month-on-month increase of 10% and year-on-year increase of 24%. Sichuan and some other regions implemented power curtailment as the power consumption reached a new high in August, slightly affecting the supply. However, some major smelters resumed production from the maintenance, and there were new capacities put into production. The total output of lithium hydroxide increased significantly. More large-scale smelters will resume production in September, and the national output of lithium hydroxide is expected to rise 6% month on month and 19% year on year to 14,760 mt.

Ternary materials

China produced 37,205 mt of ternary materials in August, an increase of 1.7% month on month and 87% year on year. On the supply side, some ternary material companies put new capacities into production, while some companies restricted production due to the power curtailment in summer. The overall output increased. On the demand side, the leading battery enterprise had high inventories of high-nickel ternary materials, and the market was bearish on the sales of car models with high-nickel ternary material batteries. Therefore, the purchase of high-nickel ternary materials declined. The overall power market demand continued to grow, and orders for the 5 and 6 series products remained abundant. The demand from high-end digital market and small power market was increasing, so the ternary demand still stood high. The demand from motive power and e-bike markets further rises in September, and some ternary material companies will expand production. The output of ternary materials is expected to rise 2% on the year and increase 63.2% on the year to 37,965 mt in September.

LFP

China produced 31,810 mt of LFP in August, an increase of 6.7% month on month and 121% year on year. Some leading LFP plants put large scales of new capacities into production, while the output growth in some regions slightly slowed down due to the power curtailment in summer. The overall supply still increased. Downstream application rate of LFP battery keeps rising near the traditional peak season in late Q3. The consumption in the new energy vehicle market is expected to grow, and more LMO and ternary materials will be replaced by LFP in the e-bike market. The overall LFP demand is expected to strengthen in September. China’s LFP output is expected to stand at 33,110 mt in September, an increase of 4% month on month and 105% year on year.

LMO

China’s LMO output stood at 7,910 mt in August, a month-on-month decrease of 2.8%, but a year-on-year increase of 35%. Prices of lithium salt, electrolytic manganese dioxide, trimanganese tetraoxide, and other raw materials rose rapidly. Most small and medium-sized LMO producers had difficulties in purchasing, and they maintained low stocks of lithium carbonate on rigid demand. Demand from downstream 3C market remained weak, two-wheeler market saw surging demand for LFP, and the higher lithium salt prices drove up LMO prices, which further weakened the LMO demand. The production and sales of small and medium-sized were greatly affected, of which the orders declined. However, some large-scale companies with sufficient funds and production capacities maintained stable overall production. LMO output is expected to stand at 7,850 mt in September, a month-on-month decrease of 0.8% and year-on-year increase of 22%.