Exclusive: China's base metals output in April

SHANGHAI, May 9 (SMM) – This is a roundup of China's base metals output in April 2020, from an exclusive survey of key producers by SMM analysts.

Copper

China’s copper cathode output in April edged higher from a month ago as smelters resumed production and new capacity further ramped up with the slowing down of the widespread of the coronavirus in China.

The latest SMM survey showed that China produced 752,400 mt of copper cathode in April, 1.17% higher on the month and 6.5% higher on the year. The year-on-year increase was due to a lower production figure in 2019 as concentrated smelters were conducting maintenance in Q2 last year. 

Production in the first four months of 2020 totalled 2.91 million mt, down 0.28% from the same period in 2019.

Operation pressure of Chinese copper smelters eased in April as improved consumption lifted prices of sulphuric acid. Sulphuric acid are no longer sold at discounts in most regions, except for in north China. Nonetheless, prices of sulphuric acid remained markedly lower than the production cost.

The COVID-19 outbreak outside China disrupted mining operations and shipment from major ore production countries in April, especially in Peru. Delivery of seaborne copper concentrate shipments has declined and Chinese smelters are worried about the near-term supply of raw materials. More smelters have planned for maintenance in the second quarter of 2020, which could negatively affect copper cathode output in June and July. 

According to production schedules at smelters, domestic copper cathode output in May is estimated at 740,100 mt, 1.38% lower month on month but 16.82% higher year on year. The accumulative output in January-May is estimated at 3.64 million mt, up 2.71% from the same period a year ago.

Greater impact of maintenance and the constraint of raw materials supply will account for the lower output for the month of May.

Alumina

China’s alumina output stood at 5.65 million mt in April. This included 5.4 million mt of metallurgical-grade alumina, with the daily output up 2.61% on the month but down 7.07% on the year to 179,800 mt. Output of metallurgical-grade alumina in the first four months of the year totalled 21.56 million mt, 8.61% lower on the year.

Alumina prices recovered slightly after bottoming out in April. This, together with smaller output cut in Shanxi and Henan driven by the easing impact of COVID-19 accounted for the higher daily output in April. The increased production offset the cutback at production lines using imported bauxite at SPIC Shanxi Aluminium, Luoyang Wanji and Chongqing Bosai.

SMM sees output of metallurgical-grade alumina at 5.53 million mt in May, with the daily output edging lower on the month to 178,000 mt, due to potential greater output cut at refineries in north China (such as Chinalco Shanxi) that consume imported bauxite. As of early May, operating capacity of metallurgical-grade alumina stood at 65.08 million mt.

SMM will closely monitor changes in operations of lines using imported bauxite in Shanxi and Henan as well as refineries willingness to resume production amid a gradual rally in prices.

Aluminium

China’s primary aluminium output rose 2.4% year on year to 2.96 million mt in April (30 days). As of the end of April, there was 36.51 million mt/year among 41.23 million mt/year of existing primary aluminium capacity in operation, up 300,000 mt/year from a month ago, while operating rates across Chinese primary aluminium producers inched up 0.7 percentage point to 88.5% as a rally in aluminium prices pushed profits at some producers back into positive territory. Primary aluminium capacity going offline due to maintenance or production curbs reduced to 570,000 mt/year, while new or idled projects in Inner Mongolia, Yunnan and other regions ramped up or recovered production as expected.

During the first four months of 2020, China’s primary aluminium output increased 3.6% year on year to 11.93 million mt, while consumption shrank 5.5% to 10.7 million mt. Consumption in China has picked up, and that accelerated the depletion of social inventories of primary aluminium in the country. China’s production of primary aluminium is expected to climb to 3.07 million mt in May (31 days), up 0.1% year on year, as the aluminium price rally will encourage new projects to come on stream as planned and more projects will recover operations from maintenance or production curtailments.

Refined nickel

China’s production of refined nickel decreased 7.63% to 14,400 mt in April from a month earlier, to produce a year-over-year gain of 14.55%.

Despite stable operations, last month’s production fell from March due to different methods of calculation at some smelters.

Most of nickel smelters maintained stable operations last month: the smelter in Gansu kept its monthly production at 13,000 mt; the smelter in Xinjiang increased its production slightly from the first quarter and will continue such a production plan in May; production at smelters in Jilin and Shandong was stable; the smelter in Tianjin has barely changed its production last month but will likely scale back operations due to concerns over raw material costs and profits; the smelter in Guangxi has yet to resume its refined nickel production line.

China’s refined nickel output is expected to increase to 15,100 mt in May, as a rally in nickel prices encourages smelters to maintain stable production following the easing of coronavirus containment measures. 

The anticipated increase in production comes despite raw material supply woes at some smelters caused by coronavirus lockdowns outside China.

Nickel pig iron (NPI)                                                                                       

China’s production of NPI fell for a fifth straight month in April, falling 4.49% from March to 38,400 mt Ni, and NPI output was 19.91% lower than the same month a year ago, showed SMM data.

Tight ore supply and a small ferronickel supply surplus forced some large smelters to reduce production of high-grade materials.

Production of high-grade NPI extended its decline, falling 7.33% on the month to 31,300 mt Ni, while that of low-grade materials jumped 10.46% to 7,100 mt Ni as some integrated stainless steel and NPI mills stepped up production of 200-series.

Some NPI producers have recovered production from maintenance or production curbs, which is likely to boost China’s NPI output to 38,700 mt Ni for the month of May, 0.46% higher from April. Output of high-grade NPI is expected to rebound 0.59% to 31,500 mt Ni, while that of low-grade material will increase 0.87% to 7,100 mt Ni.

While a rally in NPI prices improves profits, NPI producers in China struggle to step up production significantly this month due to continued tightness in nickel ore supply, which is caused by lockdowns from global suppliers such as the Philippines.

Nickel sulphate

China’s production of nickel sulphate fell in April, as higher raw material costs bolstered by a nickel price rally and weak demand forced some producers to suspend production to clear inventories.

The SMM survey showed that 44,500 mt of nickel sulphate, including 39,100 mt of battery-grade materials and 5,500 mt of electroplating-grade materials, was produced in China last month, down 6.88% from a month earlier and 20.54% from a year earlier.

The shut-ins have wiped out 5,000-6,000 mt of nickel sulphate output last month, and April’s output translated to 9,900 mt in Ni content.

As car manufacturers in Europe and the US were shuttered after COVID-19 driven lockdowns in mid-March, Chinese precursor producers began to feel the pain in May and received fewer orders, which reduces the demand for nickel sulphate.

China’s output of nickel sulphate, however, will rebound 4.97% from April to 10,300 mt Ni in May, as producers that suspended production in April plan to reopen later in the month.   

Zinc

China’s refined zinc output rose on expectations in April, as smelters that carried out maintenance in February and March or have suspended  operations since last year restarted their operations. Those smelters are mostly located in Inner Mongolia and Gansu. 

The latest SMM survey showed that 479,600 mt of refined zinc was produced in China in April, up 2.79%, or 13,000 mt, from a month ago and up 4.02% from a year earlier. Zinc capacity which was covered in the SMM survey remained unchanged at 6.09 million mt on an annualised basis.

The production in March was revised up to 466,600 mt due to the resumption of a smelter in Hunan. Surveyed smelters produced 74,133 mt of zinc alloy in April, up 7.93% on the month, with hot-dipped material accounting for 59,783 mt.

The resumption of logistics services have helped smelters to resume their operations to normal levels in April, and this also lifted the zinc production last month.

Logistics have also improved in southwest China and central China compared to a month earlier, when the lingering impact of the coronavirus pandemic on trans-provincial delivery disrupted raw materials supply in Yunnan and Shaanxi.

Last month, the recovery of production has offset the reduction caused by maintenance at smelters, which occurred mostly in Qinghai, Guangdong and Yunnan.

SMM expects China’s refined zinc output to fall about 4,500 mt from April in May as some smelters will bring forward maintenance schedule due to narrowed profit margins and some smelters in Yunnan, Gansu, Inner Mongolia and Guangxi had already planned for overhauls in May. 

Profits at smelters have been squeezed by falling treatment charges (TCs) of zinc concentrate, weighed by delayed shipments from overseas amid the COVID-19 crisis and low raw material inventories at domestic smelters. As of May 8, SMM assessed the TCs for domestic zinc concentrate have declined to 5,000 yuan/mt in metal content, with TCs for imported concentrate dipping to $150/dmt.

Lead

Primary lead output in China extended its increase in April, as some smelters ramped up production after the resumption in March and as some smelters recovered production from maintenance.

China’s output of primary lead increased 9.34% from March to 262,000 mt in April, 1.05% higher than the same month of 2019. Output in the first four months of 2020 was 4.3% lower than the same period the year before, compared to a decline of 6.13% in Q1 2020.

Smelters including Henan Yuguang, Hunan Jingui and Western Mining recovered production from maintenance last month. Some smelters began routine maintenance in late April, which had little impact on overall primary lead output for the month.

The SMM survey also showed that tighter availability of imported lead concentrate caused by lockdowns outside China from mid-March has yet to have a negative impact on the lead production in China, as smelters have kept some ore inventories. However, tighter availability of cargoes has depressed TCs for lead concentrate in China.

Mines located at a high altitude such as Inner Mongolia will resume production in May, which is set to help ease tightness in lead concentrate supply in China and slow the decline in TCs.

China’s production of primary lead is expected to dip to 254,000 mt in May as Anhui Tongguan, Chifeng Shanjin, Yunnan Mengzi and some other smelters will conduct maintenance. The decline in output is likely to be limited by the recovery at Humon and Minshan who have resolved their facility faults.

Tin

Refined tin output in China shrank last month, propelled by a drop in the southwestern province—Yunnan. The maintenance-driven closure of some smelter also lowered refined tin production last month.

Production of refined tin in other regions, including Jiangxi province in east China, was generally stable last month. 

China’s refined tin output decreased 10.6% from March to 10,730 mt in April, and is expected to extend its decline to around 10,500 mt in May due to continued tightness in supply of raw materials including ore and scrap.