SHANGHAI, Mar 10 (SMM) — This is a roundup of China's metals output in February 2022, from an exclusive survey of key producers by SMM analysts.

Copper cathode

Domestic copper cathode output in February stood at 835,700 mt, up 2.1% month-on-month (MoM) and 1.7% year-on-year (YoY).

Overall, domestic smelters resumed the production steadily in February. After the output of several large smelters in the south returned to normal levels, the overall domestic copper cathode output rose both MoM and YoY. Only a small number of smelters in north China were affected by the Winter Olympics, reducing the output by about 15,000 mt. On the raw material side, the market still maintained relatively ample supply, and the inventory of copper concentrate among smelters stood high. With the successive launch of new capacities of overseas mines, the spot TC of copper concentrate has exceeded $65/mt In terms of blister copper, blister copper under long-term orders that was stranded overseas in the second half of last year arrived in China, and the output of some smelters continued to increase due to large inventories of blister copper. At the same time, the prices of sulphuric acid rallied on rising domestic demand and strong overseas consumption, and the smelters maintained high production enthusiasm on lucrative profits.

Judging from the production plans in March, the smelters in north China will gradually recover from the disruption of the Winter Olympics, while some smelters will conduct maintenance in late March. However, under the premise of high blister copper supply in the market, the output of copper cathode will be little affected. Meanwhile, the smelters have not been greatly affected for the time being due to the continuously falling SHFE/LME price ratio. The abundant copper concentrate inventory allows the smelters to maintain high operating rates, and there have not been any advanced maintenance plans. It is expected that China's copper cathode output will be 865,900 mt in March, an increase of 3.6% month on month and 0.6% year on year.

Alumina

China alumina output in February (28 calendar days) was 5.47 million mt, of which metallurgical-grade alumina output stood at 5.27 million mt, according to SMM statistics. The average daily output of metallurgical-grade alumina stood at 188,000 mt, a decrease of 16.15% MoM and 6.74% YoY.

The heating season policy and strict environmental protection measures in north China in February have had a relatively limited impact on the roasting capacity of alumina refineries in Shandong, while those in Shanxi and Henan would tell a totally different story. Among them, the output in Shanxi dropped by 21% month-on-month, and by 32% in Henan. The production of two alumina refineries in Guangxi was restricted due to the COVID pandemic, and the output in Guangxi fell 24% month-on-month.

On the whole, the production of alumina experienced violent changes in the first half of February. And with the relaxation of environmental protection policies and the reasonable control of the pandemic in south-west China, the production capacity that was restricted before gradually recovered. In February, it was estimated that the net imports of alumina stood at 150,000 mt, and there was a shortage of 255,000 mt in the month. However, with the release of new alumina capacity in March and the rapid recovery of existing capacity, this shortfall will be quickly filled. Alumina supply and demand will return to the tight balance. (1 mt of aluminium consumes 1.925 mt of alumina).

Aluminium

China produced 2.95 million mt of aluminium in February (28 days), down 2.35% on the year. The daily output averaged 105,000 mt, up 1,900 mt/day on the month. The output totalled 6.15 million mt from January to February, a decrease of 3% on the year. On the supply side, more aluminium smelters resumed the production or put new capacities into production in February. Among them, the operating aluminium capacity in Yunnan rose significantly amid support from the government and China Southern Power Grid. Throughout the month, a combined capacity of 740,000 mt was resumed or newly put into produciton in Yunnan. Inner Mongolia, Guizhou, Shanxi, and Guangxi steadily resumed the production in February with a total capacity of 276,000 mt. The outbreak of COVID pandemic in Guangxi caused an emergency shutdown of 420,000 mt capacity of an enterprise in Tianyang city. As of early March, the domestic operating aluminium capacity reached 38.98 million mt, with the valid installed capacity at 44.52 million mt, hence the average operating rate stood at 87.5%. The downstream sectors of aluminium liquid saw lower operating rates in February due to the Chinese New Year holiday, and the proportion of liquid in the entire product portfolio dropped 3.1 percentage points to 61.1%.

The domestic supply side has been rising steadily entering March, of which Yunnan is expected to contribute another 440,000 mt of operating capacity (including new capacity being put into production). New capacities and resumption of production in other regions is estimated at 120,000 m. With the steady growth of the average daily output in March, the output of aluminium is expected to reach about 3.3 million mt. On the demand side, the current aluminium downstream is in seasonal recovery, and the social inventory of aluminium ingot is expected to fall in mid-March, and reach 1.15 million mt by end of the month. It is necessary to continue to pay attention to the progress of domestic aluminium production resumption and the recovery of downstream demand.

Primary lead

China produced 237,900 mt of refined lead in February, down 13.5% MoM and 5.01% YoY. The combined output in January-February rose slightly by 0.24% from a year ago. Production capacities of enterprises involved in the survey totalled 5.71 million mt in 2022.

Due to the Spring Festival holiday in February, most small and medium-sized refined lead smelters reduced the production for holiday or took the opportunity to conduct maintenance. In addition, there were less calendar days in February (28 days). As such, the refined lead output in the month fell as expected. In addition, the output in February 2022 dropped compared with the same period of last year, mainly because the local governments encouraged migrant workers to stay put for the Chinese New Year due to the consideration of pandemic prevention and control in 2021. As a result, refined lead smelters had shorter holidays, and output base in February 2021 is higher than in previous years, and also higher than in 2022.

Looking forward to March, the Spring Festival holiday factor will go away, and March also has 31 calendar days. Furthermore, the refined lead smelters are resuming their production. Hence the output is likely to be higher than that in February. In addition, Anyang Minshan, Hunan Yinxing will complete the equipment maintenance soon, and Henan Qinling resumes the production, which will all contribute additional otuput in March. SMM expects China's refined lead output will rise more than 40,000 mt to 285,000 mt in March.

Secondary lead

SMM data showed that China produced 320,300 mt of secondary lead in February, down 8.77% MoM but up 52.15% YoY. For January-February, the combined output surged 24.90% from the same period last year. Meanwhile, China produced 279,100 mt of secondary refined lead in th month, down 16.11% month-on-month, and up 54.09% from a year ago. Combined output in the first two months in 2022 advanced 25.27% on the year.

According to SMM research, the output of secondary lead declined as expected in February, mainly due to the shortened production time of some small smelters during the Spring Festival holiday. Meanwhile, the production of some smelters in Hebei, Henan and other places was restricted by the intensive environmental protection control for the Winter Olympics. In addition, the cold weather in winter also suppressed the dismantling activities of some smelters. A few large smelters in Inner Mongolia and Ningxia carried out overhauled or cut the production. Meanwhile, the smelters in Shanxi, Hunan, and Jiangxi were overhauled for 15-30 days, resulting in a significant reduction in output. The overall output in February fell as expected.

In March, smelters that carried out maintenance in February are expected to resume normal production one after another, bringing about palpable increases. The impact of the Winter Olympics, Paralympics and the Two Sessions is expected to be lifted in mid-to-late March. Smelters that were closed during the Spring Festival will also gradually resume the production. Nonetheless, the market shall stay vigilant the potentially higher productoin costs of lead-acid battery scrap traders and secondary lead smelters after the implementation of new VAT policy for scraps. And the supply and demand sides are wait and see at the moment. The difficulty of obtaining VAT invoices for battery scraps varies due to different local policy requirements, and it is expected to have certain interference with the supply of raw materials and finished products of secondary lead smelters. Secondary lead smelters and traders are actively seeking solutions, and the supply shortage will gradually ease. It is expected that the output in March will still usher in a relatively great growth.

Refined zinc

China's refined zinc output stood at 458,400 mt in February, down 59,200 mt or 11.43% MoM and 2.72% YoY. From January to February 2022, the combined refined zinc output stood at 976,000 mt, a decrease of 3.7% year on year.

SMM survey showed that the MoM decrease in domestic refined zinc output in February was more than expected. The decrease was the result of multiple factors. First of all, Inner Mongolia Zijin went through a small-scale overhaul, and the output recorded a month-on-month drop. Routine maintenance of some smelters in Yunnan as well as the production cuts of one smelter for lack of ore lowered the local output. Some small and medium-sized smelters in Hunan suspended the production for Chinese New Year holiday in late January, and will not resume the production until mid-March or end of the month, resulting in major reductions. Some small and medium-sized smelters in Sichuan suspended the production until mid-February. The smelters in other areas were also closed for the holiday. In addition to the above factors, less working days in February was the main reason that reduced the output as a whole. The market still saw some increase in output. Some smelters in Shaanxi ramped up the production or resumed full production, which contributed most of the increases.

China's refined zinc output is expected to be 528,500 mt in March, a significant increase of 70,200 mt from February and up 6.37% or 31,700 mt YoY.  From January to March 2022, the combined refined zinc output is estimated to be 1.51 million mt, a decrease of 0.39% year on year. The YoY increase is possible mainly because the output in Inner Mongolia in the same period in 2021 was low due to energy consumption control. And the MoM growth is a result of multiple factors. For example, Huludao Zinc resumed normal production; Some smelters in Shaanxi will further lift the production; Inner Mongolia Zijin will complete the overhaul and resumed normal production; some small and medium-sized smelters in Hunan will resume the production in mid-March or the end of March; The smelters in Guangxi plan to resume the production around mid-March; The production in other areas will also be resumed after the Spring Festival. The most important reason is still the working days, which return to normal level in March. On the other hand, some small and medium-sized smelters in Sichuan will be shut down for maintenance in March; while some in Gansu underwent maintenance in the month, resulting in potential reduction in output.

Refined tin

Domestic refined tin output was 12,165 mt in February, a decrease of 10.48% from January, and a slight increase of 2.84% year-on-year, according to SMM research. The combined output in January-February dropped 7.02% YoY. The main reason for the MoM decrease in February was that the smelters were closed for the Spring Festival holiday, which resulted in less working days. And the maintenance of some smelters also lowered the overall output. In details, the output in Yunnan fell slightly month-on-month, which was also due to the Spring Festival holiday in February. Less working days in February lowered the output, and some smelters are still under maintenance now. The output in Guangxi dropped significantly MoM because of smelters’ maintenance. The output in Jiangxi fell slightly month-on-month as some local smelters were shut down for the Spring Festival in the month. The output in other regions in February did not change much compared with January. A few smelters maintained normal production during the Spring Festival holiday, hence the output changed little MoM.

Domestic refined tin output in February fell as expected, and the influencing factors were also in line with estimate. According to SMM research, mainstream smelters have basically resumed normal production in March, and only a few smelters are still under maintenance. To sum up, the output of domestic smelters in March will rebound significantly compared with February due to the end of the holiday and the expected output growth of a few smelters. SMM predicts that the domestic refined tin output in March will be 13,450 mt.

Refined nickel

China produced 12,900 mt of refined nickel in February, up 8.12% MoM and down 5.51% YoY. The decline in output was mainly due to less calendar days in February. In addition, some manufacturers carried out maintenance during this period.

The output of refined nickel is expected to stand at 12,700 mt in March 2022. The output is likely to drop 1.5 MoM and 2.5% YoY. The output in March may stand below the normal level as the pure nickel plants in Xiajiang have maintenance plans.

Nickel sulphate

China’s output of nickel sulphate stood at 25,000 mt in metal content, or 113,800 mt in physical content in February, down 4.08% MoM but up 66.0% YoY. In February, due to the combined effects of fewer natural days, longer holidays, and poor profits that forced some nickel salt factories to reduce the production, the output fell significantly. From the structure of raw materials, the proportions of nickel briquette and nickel powder declined significantly due to poor cost efficiency, and the proportion dropped to 42%. Some companies said that according to the current nickel prices, they would stop using nickel briquette from March and suspend the operation of dissolution lines. The proportion of MHP and scrap increased, and the proportion of MHP rose to 36% in February. Macro sentiment fluctuations, coupled with capital disturbances, have sent nickel prices to new highs constantly in early March. For nickel sulphate, the pressure from the raw material side surged amid expanding SHFE-LME spread. The production in March will face greater uncertainties. The output of nickel sulphate is expected to stand at 26,000 mt in Ni content in March, up 4.3% MoM and 20.5% YoY. Concerns about the supply of raw materials have increased, and the production of enterprises is scheduled based on market situation.

NPI

Domestic NPI output stood at 32,600 mt in Ni content in February, up 2.8% MoM and down 13.9% YoY, according to SMM research. Among them, the output of high-grade and low-grade was 26,800 mt and 5,800 mt respectively. The month-on-month decline was mainly due to the reduction in natural days and environmental protection-related production restrictions in February, and the plants in north China were more seriously affected. Among them, Shandong, Inner Mongolia, Liaoning and Hebei all saw reduced output. The decline of low-grade NPI output was also owing to the maintenance of integrated stainless steel mills.

Domestic NPI output in March is expected to rise 2.76% month on month to 39,500 mt in Ni content. And the output of high-grade and low-grade NPI is likely to stand at 32,600 mt and 7,000 mt in Ni content respectively. An output increase could be expected in March mainly due to the resumption of production. However, in light of limited nickel ore inventory, it is difficult for the output to increase significantly.

Stainless Steel

According to SMM survey, the domestic stainless steel output in February totalled about 2.33 million mt, down 14,000 mt or 0.58% MoM and down 4.83% YoY.

Among them, output of #200 stainless steel stood at 628,000 mt, down 20.83% YoY; output of #300 stainless steel stood at 1.295 million mt, up 14.3% YoY; output of #400 stainless steel stood at 407,000 mt, up 22% YoY. 

In February, due to CNY holiday and Winter Olympics, some steel mills reduce or even stopped the production in early February. In addition, there were only 28 days in February, so the output in February was basically flat from that in January. However, in March, most enterprises will resume the production, and the output of stainless steel is expected to rise by about 27.6% month-on-month, and down 1.4% year-on-year.

Among them, the increase will be mainly contributed by #300 stainless steel. In addition to production recovery, the addition output of new production lines in Delong will be mostly #300 stainless steel. The trial production is expected to see an output rise of about 60,000 mt in March. Thus #300 stainless steel output will increase 20.6% MoM and 14% year-on-year.

#200 stainless steel and #400 stainless steel output will both decline year-on-year, with a drop of 12.1% and 18.2% respectively.

Lithium carbonate

China’s lithium carbonate output was 18,609 mt in February, a month-on-month decrease of 2% but a year-on-year increase of 51%. The output fell MoM as some lithium salt companies were still under maintenance in February, and some took break during the Chinese New Year. Less calendar days in February also contributed to the declines. In March, some companies will complete the maintenance one after another, and new capacities are preparing to ramp up the production. At the same time, considering the production increase brought about by the warmer weather in Qinghai, it is expected that the supply of lithium carbonate in March may achieve a greater increase. China’s lithium carbonate output is expected to stand at 23,581 mt in March, up 27% MoM.

Lithium hydroxide

China’s lithium hydroxide output was 12,702 mt in February, a month-on-month decrease of 22% but a year-on-year increase of 6%. Some lithium salt manufacturers started or were still under maintenance in February, and the overall output was at a low level. In addition, some manufacturers took holidays during the Spring Festival, and coupled with a short production cycle in February, the performance of lithium hydroxide production in February weakened month-on-month. In March, although some manufacturers will complete the maintenance, and some new capacities will start to ramp up the production, there are still some leading factories that have not completed their annual maintenance, and the overall output remain at a low level. China’s lithium hydroxide output is estimated at 14,653 mt in March, a month-on-month increase of 15.4%.

Cobalt sulphate

China’s cobalt sulphate output was 5,735 mt in metal content in February, a month-on-month decrease of 12% but a year-on-year increase of 40%. On the supply side, during the Spring Festival in February, nearly half of the cobalt salt factories were suspended for holiday or maintenance, hence the output declined, combining less calendar days in February and tight logistics and transportation of intermediate products that reduced the supply of raw materials. It is expected that the arrival of intermediate products will improve in March compared with the previous month, and raise the output accordingly. China’s cobalt sulphate output is expected to stand at 5,876 mt in March, up 2% MoM.

Co3O4

China’s output of Co3O4 stood at 7,377 mt in February, down 2% MoM and up 32% YoY. In February, some manufacturers took the Spring Festival holiday, and the prices of cobalt salts rose, lifting the cost of Co3O4. In addition, there were also less calendar days in February. And in light of sluggish downstream demand throughout the first quarter, some manufacturers cut the production. China’s Co3O4 output is expected to stand at 7,434 mt in March, up 1% MoM.

PCAM

China’s PCAM (precursor of cathode active materials) output was 59,448 mt in February, a month-on-month decrease of 2.5% but a year-on-year increase of 65%. On the supply side, the new capacity of several precursor factories started mass production in February, but some small and medium-sized enterprises had the Spring Festival holiday in February and stopped the production for maintenance, and the overall output fell slightly, on the combination of less calendar days in February. On the demand side, the power battery sector presented stable demand, while the overseas market has not yet recovered. In addition, the demand from electronics sector has been affected by the sharp rise in lithium prices, leading to less orders. And the sector’s demand was further contained by the Spring Festival as some material factories took holidays during this period. It is expected that PCAM output will be 66,097 mt in March, an increase of 11% from the previous month amid the recovery of production and the added output from new capacities.

NMC materials

China’s NMC material output was 43,412 mt in February, a month-on-month decrease of 6% but a year-on-year increase of 55%, The output dropped mainly due to higher difficulties in obtaining lithium salt and less calendar days in February, and some manufacturers also took holidays or carried out maintenance during the Spring Festival. The proportion of the 8 series NMC materials rebounded, mainly due to the increase in high nickel orders from overseas and Chinese battery factories. Some leading battery factories advanced their orders to March, resulting in higher demand. Some small-sized factories will also resume the production in March. The output in March is expected to rise MoM by 10% to 47,964 mt.

LFP

China’s LFP material output was 53,337 mt in February, a month-on-month decrease of 14% but a year-on-year increase of 145%. The output of some companies fell due to the Spring Festival holiday, equipment maintenance and less production schedules. Meanwhile, the supply of lithium carbonate was tight in the month, restricting the production of some LFP companies and new capacities amid greater procurement difficulties. In March, affected by factors such as rising lithium salt prices, declining terminal demand and equipment maintenance, some companies will be forced to reduce the production. China’s LFP material output is expected to stand at 49,596 mt in March, down 7% MoM.

LCO

China’s LCO material output was 6,648 mt in February, a month-on-month decrease of 12% but a year-on-year increase of 3%. During the off-season for LCO materials and terminal electronics products, the supply of LCO declined in February, on the combination of high lithium salt prices that suppressed the demand of some mid and small-sized manufacturers. China’s LCO output is expected to stand at 7,327 mt in March, up 10% MoM.

LMO

China’s LMO materials output stood at 4,113 mt in February, a month-on-month decrease of 27%, but a year-on-year increase of 5%. Downstream demand weakened in February. Because most terminal enterprises have completed the procurement of LMO materials from the end of 2021 to January 2022. In addition, some LMO enterprises reduced the production for equipment maintenance or the Spring Festival holiday, reducing the overall output in February. China’s LMO output is expected to stand at 6,155 mt in March, up 50% MoM.

Battery-grade manganese sulphate

China's battery-grade manganese sulphate output stood at 18,300 mt in February 2022, a drop of 16.9% MoM.

After the Spring Festival, manganese sulphate factories in Guizhou and Guangxi resumed the operation as a whole, but the overall supply in February decreased month-on-month. In the first quarter, the demand from PCAM (precursor for cathode active materials) manufacturers did not shrank significantly, and the market also saw more small orders apart from monthly and annual long-term orders. Therefore, after the production was resumed, the prices of battery-grade manganese sulphate stabilised at a high level supported by the demand side. In addition, the quotation of manganese ore at domestic ports in February increased compared with that before the Spring Festival, raising the procurement cost of manganese factories. SMM expects that the prices of battery-grade manganese sulphate may move around 10,000 yuan/mt or above in February and March. As far as SMM understands, some leading terminal companies are planning their purchases on rigid demand, and the prices for long-term orders are lower than the spot prices.

High-carbon ferrochrome

The output of high-carbon ferrochrome continued to fall in February, and totalled 499,300 mt, down 9.53% MoM and up 41,900 mt or 9.16% YoY, according SMM statistics. The output in Inner Mongolia stood at 291,500 mt, down 3,300 mt or 1.12% MoM. The  natural days in February are 3 days less than in January, leading to less production time in February. In addition, the ore prices kept rising on low chrome ore inventory at ports. The price hike of ferrochrome fell behind that of costs, hence the manufacturers in Hunan, Sichuan, Guizhou, Guangxi in the south still suffered losses. In addition, some low-profit ferrochrome manufacturers chose to reduce or stop the production for equipment maintenance during the Spring Festival holiday.

The output of high-carbon ferrochrome in March is expected to be 552,100 mt, which is higher than that in February. Since the end of February, stainless steel mills gradually disclosed their production resumption plans, resulting in potentially higher output and improving demand for ferrochrome. Ferrochrome manufacturers are generally optimistic about the future market. Recently, the quotations of high-carbon ferrochrome have been rising steadily. The losses in the south have gradually narrowed. The ferrochrome manufacturers in south China that had stopped or reduced the production will gradually resume the production.

EMM

The domestic EMM output in February stood at 9,000 mt, a drop of 31% MoM and 88% YoY.  The average monthly ex-works price of EMM in February was 39,281.25 yuan/mt, a decrease of 3.82% from the previous month. The average monthly FOB price of EMM was $6,297/mt, a slight drop of 2.61% MoM.  The average operating rate of domestic EMM plants was still as low as 5% in February, according to SMM. Although stainless steel mills were gradually resuming the production, they were highly resistant to the high manganese prices when purchasing just on rigid demand. Hence the market was generally wait and see and the supply and demand sides were in ferice play. SMM expects that the operating rates of EMM plants in March will still be low, and the plants may be able to further lower their quotations.   

Industrial silicon metal

The domestic industrial silicon metal output stood at 240,000 mt in February, down 3.2% MoM due to less working days in the month but up 18.7% YoY, according to SMM statistics.

Large factories in Xinjiang ramped up the production in February, and silicon factories in other producing areas such as Guizhou, Guangxi resumed the production in early February after the overhaul, resulting in a slight increase in domestic daily output in February compared to January. The two major producing areas of Yunnan and Sichuan were in the dry season, and the operating rates in February were basically stable MoM.

In March, some silicon factories in Nujiang (in Yunnan province), Leshan (in Sichuan province) and Hunan Province will successively lift their production. However, there will also be some factories in Xinjiang and Fujian being shut down for maintenance. Overall, more capacities will be resumed than those go to maintenance in March. In addition, due to the increase in the number of production days in March, SMM expects that industrial silicon metal output will rise by around 285,000 mt in March.

Polysilicon

SMM data shows that China's polysilicon output was 50,600 mt in February, an increase of 0.2% month on month and 46.3% year on year. The newly added capacities of Tongwei and Daquan were gradually ramping up their production, and another manufacturer that resumed the production also contributed additional output. The output in February rose month-on-month. However, as the number of calendar days in February is 3 days less than that in January, the domestic total output was basically flat month-on-month.

The new capacities put into operation in Q4 last year will reach full production in March, coupled with added output from resumed capacities, it is expected that polysilicon output will reach a new high of 56,700 mt in March. The rest of the new capacities to be put into production during the year has been delayed to varying degrees, and it is expected that the release of production will be concentrated in the second half of this year.

Silicon-manganese alloy

SMM data shows that in February 2022, the total output of silicon-manganese alloys in China was 914,100 mt (including 63,100 mt of high-silicon silicon-manganese and 851,000 mt of plain-silicon silicon-manganese), an increase of 4.2% month-on-month and a year-on-year decrease of 1.2%. The combined output in January and Ferbuary totalled 1.79 million mt, down 5.54% YoY.

According to SMM research, the overall silicon-manganese market in north China maintained normal operating rates in February, and some plants in south Guangxi gradually resumed the production, but the contribute to output was limited. At the same time, the terminal was recovering as well, and the demand was relatively robust. The overall market was dominated by a positive outlook. However, due to the previous intensive production restrictions at the terminal side, the silicon-manganese market saw less shipments, and the spots were mostly stored as inventory. As such, the spot prices rose only limitedly. However, in terms of cost, the prices coking coal, coke and manganese ore all rose after the Spring Festival, significantly pushing up the costs of silicon-manganese alloy. On the premise that the terminal demand was guaranteed, the prices of silicon-manganese had certain support from the cost side. On the whole, the current conflict between Russia and Ukraine has driven the demand in the international manganese market, and the domestic market has also been boosted. Under this situation, SMM expects that the profit of terminal steel mills may expand in March. After the spot inventory of silicon-manganese alloy is digested to a certain extent, the spot prices of alloy may rise slightly.

Magnesium ingot

China's magnesium ingot output stood at 83,200 mt in February, up 0.99% MoM and 25.73% YoY, according to SMM statistics. The output totalled 165,600 mt in the first two months of 2022, a year-on-year increase of 23.90%.

According to SMM research, the production of domestic magnesium plants remained stable in February. In light of strong overseas alloy orders, the primary magnesium output of some magnesium alloy enterprises rose slightly. The overall output of magnesium ingots recorded a positive growth in February. According to the existing production schedules of magnesium plants, there is no such plans as to reduce or stop the production in March. With the gradual recovery of downstream demand, the output of magnesium ingots is expected to maintain at a high level of about 84,000 mt.

Magnesium alloy

China's magnesium alloy output stood at 23,100 mt in February, up 5.71% MoM and down 32.03% YoY, according to SMM statistics. The output totalled 45,000 mt in January-February 2022, a year-on-year decrease of 34.04%.

The average operating rate of magnesium alloy industry stood at 40.74% in February, up 5.71 percentage points MoM and down 35.22% YoY. At present, the overseas orders for magnesium alloys remain strong, and the top-tier enterprises maintain high operating rates. The output of alloys in small and medium-sized enterprises has increased slightly. Some sales staff of large enterprises said that the orders have been scheduled at least to the end of March, and there is no plan to reduce or stop the production in the near future. Considering the strong overseas alloy orders, it is expected that under the support of the demand side, the output of magnesium alloys will be around 24,000 mt in March.

Magnesium powder

The domestic magnesium powder output stood at 5,800 mt in February, down 32.28% MoM. The average operating rate of magnesium powder manufactuers stood at 34.06%.

It is learned from the person in charge of a magnesium powder factory in Shanxi that due to the influence of the Winter Olympics, the production of magnesium powder has been restricted. At the same time, some overseas terminals chose to overstock for fear of problems in the supply of raw materials after the Winter Olympics, resulting in weaker downstream demand after the Spring Festival and a decline in the operating rates of magnesium powder factories. At the same time, the recent bearish sentiment in the magnesium market is relatively strong. Under the influence of buying hikes and not dips, the downstream participants who are not eager to restock are generally wait and see, and the market transaction is generally weak. It is expected that the output of magnesium powder in March will remain low at about 6,500 mt.

Praseodymium-neodymium oxide

China’s output of praseodymium-neodymium (PrNd) oxide in February 2022 stood at 6,094 mt, down 2.5% MoM with ion-absorbed ore separation companies in Sichuang, Jiangus, Guangdong and Guangxi contributing most of the increment, while those in Jiangxi saw output cuts.

In terms of the supply structure, PrNd oxide and alloy output was stable in major light rare earth supplying places including Sichuan and Inner Mongolia Though the first batch of mining quotas have been officially released, the middle and heavy rare earth mines in Jiangxi have not started the mining activities yet. Hence the operating rates of some separation companies in Jiangxi dropped in February on tight raw ore supply. Meanwhile, a few manufacturers in Jiangsu  quickly resumed the production after short suspension due to lack of raw ore, and the local output picked up steadily. It is expected that the supply of rare earth raw ore will continue to be tight in March.

The supply of NdFeB scrap was also tight. Due to strong downstream demand, some enterprises in Jiangxi further expanded their production from January to February. However, the expansion of production was accompanied by inventory problems, and the raw material inventory of some scrap recyclers fell below the safety level. It is expected that scrap recyclers will be able to re-stock in mid-March, and the risk of long-term order defaults still exists.

For upstream PrNd oxide supply composition, the Northern Rare Earth Group took up the largest proportion. Among the first batch of quotas for rare earth ores in 2022, the mining and separation/smelting quotas assigned to Northern Rare Earth Group rose by 36% and 40% respectively. The North Rare Earth Group's production of PrNd oxide continued to be stable in February, and the default risk on long-term orders decreased. The new oxide production line construction is time consuming. Hence the Group may still face problems such as insufficient oxide production capacity to match the metal production capacity, and the demand for toll manufacturing remains.

With multiple supply channels such as imported light rare earth ore, rare earth chloride, and scrap recycling, Shenghe Group is superior in supply capacity of PrNd oxide. In addition, the Russia-Ukaine conflict has not yet affected the import of MP rare earth metal ore from the US. It is reported that the imported light rare earth ore was stable in February. The supply of light rare earth ores and rare earth chlorides such as monazite in Sichuan was stable, and the output of PrNd oxide by Shenghe Group and its subsidiaries was basically flat MoM in February. Thanks to the existing inventory of imported middle and heavy rare earth ore, the output of PrNd oxide of Chinalco Group rose slightly, and the capacity of some subsidiaries was restored.

Praseodymium-neodymium alloy

The output of PrNd alloy stood at 5,005 mt in the same month, down 7.2% month-on-month, falling MoM for the second month following January. The output reduction mainly came from metal enterprises in Inner Mongolia and Guangxi.

In order to match the expanding NdFeB production capacity and terminal demand, metal enterprises in Inner Mongolia, Sichuan and other places have been ramping up the production since December 2021. The downstream demand has been strong post the Chinese New Year (CNY). Large-scale NdFeB magnetic material enterprises were poured in with orders, and the market also saw high rigid demand. As such, the suppply of raw ore tightened. As a major supply area of light rare earth ores, Inner Mongolia's supply capacity of PrNd oxide is temporarily weaker than that in Sichuan. Due to the large production base, the production cuts of PrNd alloy in Inner Mongolia have been quite obvious.

The output of metal enterprises in Jiangxi, Sichuan, Zhejiang and other places remained stable, but under the premise of high prices of raw materials, the financial pressure on relating enterprises increased.

Molybdenum concentrate

SMM data shows that in February 2022, the domestic molybdenum concentrate output was 16,400 mt, a drop of 15% from the previous month.

The domestic output of molybdenum concentrate in February was significantly lower than that in the previous month, mainly because many large domestic molybdenum mines were shut down during the Spring Festival holiday. At the same time, after the holiday, due to the fact that market transactions did not re-start immediately, as well as the impacts of the pandemic in many places and insufficient logistics capacity, the overall operating rates of molybdenum mines maintained a low operating rates and only resumed normal production in mid-February. As such, domestic molydenum concentrate output dropped significantly in February.

Ferromolybdenum

The domestic ferromolybdenum output was about 14,100 mt in February, down 1,800 mt or 11.32% on the month.

There are three main reasons for the palpable decrease. 1. In February, during the Spring Festival holiday, some ferromolybdenum manufacturers were shut down for holiday. Even if the rest of the manufacturers maintained production during the Spring Festival, their operating rates remained low. 2. Affected by environmental protection control, smelting enterprises in Beijing-Tianjin-Hebei and surrounding areas were basically closed and the production was suspended as well. Liaoning, home to a number of ferromolybdenum enterprises, also saw stagnated production due to environmental inspections. 3. After the Spring Festival, although most companies have ended their holidays, production has not been fully resumed due to factors such as market transactions have not yet officially started, logistics capacity has not yet been restored, and companies have not fully resumed the production. The market gradually returned to normal only since mid-February, hence the full month output dropped to some extent.

Silver

According to SMM survey, domestic silver output stood at 1105.965 mt (including 973.54 mt of mineral silver) in February 2022, down 9.08% from the previous month mainly because the production was greatly affected by the Spring Festival holiday. On the macro level, due to the comprehensive influence of the Russia-Ukraine conflicts, international gold and silver prices have fluctuated rapidly. After Russia carried out a special military operation against Ukraine, the spot gold in the United States soared above US$2,000 an ounce at one point, the first time in nearly one and a half years. And silver also followed the pace and rose above US$26 an ounce, while domestic silver prices also inflated to a high of 5,000 yuan/kg. In the short term, the upside potential of gold and silver prices depends on the evolvement of Russia-Ukraine conflicts. If the military conflict continues to escalate, it may send gold and silver prices to new highs. If the conflict subsides quickly and returns to peaceful resolution through diplomatic channels, it will help ease the upward pressure on gold and silver prices.

It is expected that silver prices will continue to move rangebound in March, and the upward room will still exist. The changes in the production of manufacturers in February were still small as a whole. However, due to the impact of the Spring Festival in February, the output of some manufacturers fell significantly. Companies saw significant output cuts include Yunnan Copper, Henan Jinli Gold and Lead, Shandong Zhaojin, Yanggu Xiangguang, Zhejiang Fuye, and Guiyan Platinum. There were also companies with added output, such as Shandong Hengbang. But this part of increase was limited, so the overall silver output fell sharply in February. It is expected that there may be a certain increase in domestic silver output in March as the number of working days returns to normal this month.

Titanium dioxide

China's titanium dioxide output stood at 316,300 mt in February, down 1.18% MoM. The output totalled 636,400 mt in January-February 2022, a year-on-year increase of 5.71%.

According to SMM research, some factories were overhauled during the Spring Festival, resulting in a slight decline in monthly output. Affected by the continuous rise in the prices of raw material like sulphuric acid and titanium ore, the cost of titanium dioxide gained strong support, and the quotations from manufacturers were relatively stable. Recently, overseas titanium dioxide giants have raised the prices of their products in April. Meanwhile, the real estate industry started to pick up in March, and the future market demand will improve. It is expected that the total domestic output of titanium dioxide will maintain a positive growth in March, and stand at about 325,000 mt.