Low SS prices force Chinese nickel pig iron producers to cut production
Interfax China reported that China's nickel pig iron producers have been forced to either cut or suspend production due to recent low prices and decreased demand from stainless steel mills.
The report cites an official of Zhejiang Huaguang Group, which is capable of producing 1 million tonnes of nickel pig iron per annum with a nickel content varying from 1% to 14%, as saying that "We are considering cutting nickel pig iron production in the coming months, as downstream demand has shrunk with the price of nickel. We will make a final decision within the week as to how much capacity to cut and when to start the reduction."
The official said that the whole nickel pig iron industry is suffering from both price declines and low purchase volumes from downstream stainless steel mills. However, Huaguang's production has remained stable to date mainly supported by long term contracts previously signed with major stainless steel mills, including Baosteel, TISCO and Zhangjiagang POSCO. The official added that the company supplies approximately 700,000 tonnes of nickel pig iron to stainless steel smelters per year through long term contracts. According to the official many small nickel pig producers in the provinces of Shandong, Sichuan and Fujian have been forced to reduce or suspend production.
Ms Wang Lixin an analyst with Beijing Umetal, a leading domestic metal consultancy said that the price of nickel pig iron grade 4% to 6% nickel fell sharply from a peak of CNY 2,600 (USD 343.01) per tonne unit in May 2007 on the back of all time high prices on the London Metal Exchange to a current CNY 2,000 (USD 263.85) per tonne unit. She added that a sharp decrease in refined nickel prices on both the domestic and international markets, twinned with sluggish consumption from stainless steel mills, is responsible for declining nickel pig iron prices. The three month nickel price on the LME fell to USD 33,350 per tonne from a peak high of USD 51,500 per tonne on May 9th 2007, representing drop of 35.24%.
Last year, Chinese stainless steel mills began to use low grade nickel pig iron as an alternative to refined nickel in an attempt to offset the high costs brought by high nickel prices, resulting in an investment wave in nickel pig iron capacity throughout the nation. Ms Wang said that "Almost 30 new nickel pig iron plants were constructed in Shandong Province alone this year and according to our field research, the new plants are all small-scale and use simple equipment." She claimed that small nickel pig iron plants have flexible production structures and can easily adapt to market demands. She added that "Small plants were able to shift to production of other ferroalloy products when nickel pig iron production became less profitable. Currently, most of the nickel pig iron producers in Shangdong have either cut or suspended production."
China's nickel pig iron production is mostly based on imported laterite ore as a raw material, which is processed in small scale blast furnaces or electric furnaces. China imports laterite ores grade 0.9% to 1.9% nickel mainly from the Philippines, New Caledonia and Indonesia.
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