Exclusive: China's base metals output in 2019

SHANGHAI, Jan 10 (SMM) – This is a roundup of China's base metals output in 2019, from an SMM survey of major producers.

Copper 

China’s production of copper cathode stood at 8.95 million mt in 2019, up 220,000 mt, or 2.4% from 2018. SMM expects the output to rise 4.42% year on year to 9.34 million mt in 2020. 

The addition in China’s copper cathode production last year fell far below the estimated rise of 600,000-650,000 mt. Besides less-than-expected materialisation of new and expanded capacity, incidents at smelters such as Baiyin Nonferrous, Shandong Jinsheng, Dongying Fangyuan, Chifeng Yuntong, West Mining Qinghai Copper, and Xinjiang Wuxin, as well as concentrated maintenance accounted for the smaller growth of output. 

Chifeng Yuntong, Chinalco South East Copper, Guangxi Nanguo, West Mining Qinghai, and Heilongjiang Zijin contributed to the majority of the copper production in 2019.

China’s copper cathode output will continue to increase with a compound annual growth rate of 5.26% in 2019-2022, SMM assessed based on capacity addition and expansion schedule at Chinese copper smelters. 

The respective production in 2020, 2021, and 2022 are estimated at 9.34 million mt, 9.9 million mt, and 10.45 million mt. 

Aluminium

China produced 35.44 million mt of primary aluminium in 2019, down 1.8% from 2018, as loss-making smelters trimmed their output in the first half of the year while production in the second half was affected by a slew of unexpected accidents. This marked the first annual production decline in about a decade.

In the same year, primary aluminium consumption in China shrank as well, falling 1.6% year on year to 36.07 million mt, as major consumers lost momentum, with less real estate floor space completed, fewer automobiles manufactured and less investment in grid projects.

For 2020, new or restarted smelting projects are expected to help China’s primary aluminium production gather pace, while an anticipated recovery in cars, durable goods and property will likely drive aluminium consumption back to growth.

SMM expects China’s primary aluminium production to grow 3.4% to 36.64 million mt in 2020, and consumption to inch up 0.3% to 36.19 million mt.

In terms of social inventories, the level of 1 million mt is unlikely to be broken around the Chinese New Year holiday in January to February. When it comes to March to May, inventories are unlikely to rise or decline substantially given a traditional high consumption season and supply expansion. In June to August, inventories will begin an uptrend and exceed 1.2 million mt. Inventory destocking is expected to begin in September to October and continue through to the first quarter of 2021.

The commissioning of new alumina projects in China are likely to be concentrated in the second half of 2020, boosting production by 1.3-1.5 million mt.

China’s net imports of alumina are expected to stand at 1.1 million mt in 2020. Supply of metallurgical-grade alumina is expected at 74.47 million mt, while demand is estimated at 70.9 million mt. There will be a supply surplus of 951,600 mt.

Prices of domestic bauxite are more likely to rise than decline in the year to come. Alumina prices are hovering at the bottom, and inventories, how fast reopened refineries can ramp up and when the import arbitrage window can open will decide the magnitude of the rally in alumina prices.

Prices of domestic alumina in 2020 are expected to rise, before decline, before rise again, in anticipation of demand and supply dynamics. 

Zinc

China’s refined zinc output came in at 5.84 million mt for 2019, up 9.64% year on year, as rising treatment charges lifted profits among smelters and encouraged them to operate in high gear.

Zinc production is expected to grow 6.78% year on year to 6.24 million mt in 2020.

TCs for domestic zinc concentrate were on a tear to a peak of 6,500 yuan/mt of Zn content in the last year. TCs slipped in some regions as smelters stockpiled in winter, but the declines were limited.

As for zinc mining domestically, there was about 200,000 mt of new capacity coming online in 2019, and more than 100,000 mt is expected in 2020. 

Tougher environmental requirements have led to the shutdown of a slew of small-scale mines, but large-scale ones were limitedly affected, suggesting that zinc concentrate supply pressure lingers.

SMM learned that Chinese zinc miners now can see a profit of 2,000 yuan/mt, which is healthy enough to keep them operate actively.

Zinc ore supply in China is expected to grow about 210,000 mt in 2020, in anticipation of inflows of seaborne materials as Chinese smelters will maintain high production and as an oversupply overseas underpins TCs. Chinese small- and medium-scale zinc miners are likely to take the lead to trim output if zinc prices fall below the break-even points for miners.

Nickel

China’s production of refined nickel climbed 3.31% from a year ago, to 157,300 mt in 2019, as rising nickel prices on Indonesian ore export ban stimulated production at some small smelters in the second half of the year. Limited availability of sulphide minerals, coupled with a pullback in nickel prices, will likely see refined nickel production in China slightly lower in 2020. SMM estimates a drop of 1.46% in China’s refined nickel output in 2020, standing at 155,000 mt. 

Output of NPI in China increased 27.96%, or 127,800 mt in Ni content in 2019, SMM data showed. High-grade NPI accounted for 508,300 mt with low-grade material taking up 75,600 mt, both were in Ni content basis. Overall NPI production in China is expected to fall 12.96% year on year to 509,000 mt in 2020. 

The NPI market performance was outstanding in 2019. Rising NPI production on the back of cost advantage and unprecedented high discounts squeezed the market of refined nickel. With high profit margins, output and capacity of NPI advanced month by month for most of 2019. Majority of the growth was contributed by large NPI plants and intergraded stainless steel mills, such as Shandong Xinhai, Tsingshan Group, Jiangsu Delong, and Baosteel Desheng.

Production at some plants edged lower at year-end due to lower inventories of raw materials and smaller profits, which were caused by falling prices of high-grade NPI as downstream stainless steel prices weakened significantly. 

SMM forecasts a shortage of raw materials following the Indonesia export ban in 2020 will weigh on China’s NPI market and see Indonesia surpassing China to become the world’s top NPI supplier in the upcoming years. The respective NPI production in China in 2020-2022 is estimated at 509,400 mt, 457,600 mt, and 350,000 mt on Ni content basis. 

China produced 136,700 mt of nickel sulphate, in metal content, in 2019, with a year-on-year increase of 33.31%. Production in 2020 is expected to rise 12.66%, to 154,000 mt. 

The expansion of China’s nickel sulphate market may slow significantly in 2019-2020. Domestic capacity of nickel sulphate increased 46% on the year to 1.05 million mt in 2019. The growth was capped as demand from the new energy vehicle sector weakened after subsidy cuts and reports of NEV incidents. In the first half of the year, selloffs of traditional fossil fuel vehicles with lower emission standards also depressed consumption of NEVs. 

SMM estimates nickel sulphate capacity to grow 23% to 1.29 million mt in 2020. With the termination of NEV subsidies by end-2020 and the removal of the “white list” of recommended battery suppliers, a reshuffle of China’s power battery industry will result in slower growth of the nickel sulphate market this year.

However, the increase in demand may pick up from 2021 on the back of positive development of the NEV market. This is likely to expand the production of nickel sulphate and keep the growth rate above 20% in 2021-2022.

Lead

Refined lead output in China came in at 5.15 million mt in 2019, up 1.5% from a year earlier, according to SMM data. SMM expects the production to rise 2.1% in 2020, standing at 5.26 million mt. 

China’s primary lead market maintained well-supplied in 2019, primarily because rising treatment charges (TCs) for lead concentrate bolstered production at primary lead smelters. Safety concerns at mines and declining grade of domestic ore triggered a surge in lead concentrate imports last year, which eased domestic ore shortage and boosted the TCs for lead concentrate. Production of primary lead received a smaller impact from environmental issues as major producers pursue green production. SMM expects China’s output of primary refined lead to continue to edge higher in 2020, but the proportion of materials purely produced from concentrate will decline. 

Production of secondary lead in China also rose in 2019 amid new and expanded capacity. Secondary lead supply was in an upward trend in the second half of the year, supported by improving profit margins and favourable national policies. 

SMM estimates an increase of 150,000-200,000 mt in China’s secondary lead production in 2020, with new capacity coming online in Anhui, Jiangxi, Inner Mongolia, and Henan, and more availability of lead-acid battery scrap.

Tin

China’s production of refined tin declined 15,500 mt, or 9.97% year on year to 139,800 mt in 2019, while the average operating rate across tin smelters dropped to 48.5% from 53.8% in 2018, as tighter ore supply depressed TCs for tin concentrate.

SMM assessments showed that tin concentrate TCs fell to 13,500-14,000 yuan/mt for cargoes of Sn 40% in the second half of September, and to 10,500-11,500 yuan/mt for cargoes of Sn 60%. 

In October, operating rates across tin smelters slipped to 41.6% from 50.1% in September, and refined tin output dropped to 9,900 mt from September’s 12,000 mt.

Tin output shrank further to 7,500 mt in November, with operating rate at a near-five-year trough of 31.3%, as China’s largest tin producer—Yunnan Tin—undertook overhaul.

China’s tin production is expected to recover 4.3% to 145,000 mt in 2020, as some large-scale smelters plan to expand production.

Meanwhile, tin concentrate ore supply is expected to remain in a tight balance. Yinman Mining is expected to reopen in 2020, but ore production is unlikely to receive a strong boost at the initial stage of its resumption.   

Production of refined tin in China is expected to be 149,000 mt and 152,000 mt in 2021 and 2022, respectively.