An order enforcing a halt to nickel pig iron (NPI) production in Huade County in central Inner Mongolia over the past two weeks is unlikely to have a significant impact on prices for the material, market participants said on the sidelines of the Asian Ferro-Alloys conference in Hong Kong on Thursday March 22.
Sintering is the first step in the process of transforming laterite ore into NPI. In this stage, laterite ore is heated to reduce its water content, but the procedure also generates a fine dust, called sintering dust, which can lead to air pollution.
“The production halt has decreased production of NPI with 8-12% nickel content in the area by 10,000-20,000 tonnes over the past two weeks. So far producers in Huade County have still not resumed production, which may result in a bigger shortfall,” the buyer added.
“But [the halt] is unlikely to have a significant impact given the region’s relatively small NPI capacity compared with the rest of China,” the buyer concluded.
Only around 2-7% of monthly production of China’s total NPI production has been affected during the suspension, according to Metal Bulletin’s calculations.
The 10,000-20,000 tonnes of affected NPI production is equivalent to around 800-2,400 tonnes of nickel metal, while China produced 34,300 tonnes of nickel metal on an average monthly basis in 2017, according to market data.
“Huade County’s NPI producers are negotiating with the local government to let them resume production,” an NPI producer based in Inner Mongolia said.
“But local governments seem to have taken a stricter attitude toward environmental management after the major conferences ended on March 20, which has lengthened negotiations. I am not sure when these NPI producers will be able to resume production,” a second NPI producer in Huade county said.
“The profits for producing NPI were good during the first quarter, so some NPI producers in other regions in China have managed to resume production in the first quarter,” senior nickel and stainless steel analyst Lin Kaiwei from China’s Galaxy Futures said.
“Meanwhile, NPI prices are still at discount compared with refined nickel prices, which also indicates that supply in the industry is not tight,” Lin added.
“Chinese NPI’s nickel metal production is projected to increase by 17% year on year to reach 120,000 tonnes in the first quarter of 2018, while nickel metal production from Indonesian NPI could double year on year to almost 55,000 tonnes,” Investment Bank Macquarie predicted in its daily report on March 6.
“The reason for the rise in nickel pig iron production in China is ready availability of cheap nickel ore, which has made nickel pig iron production highly profitable,” Macquarie added in its report.
Metal Bulletin assessed high-grade NPI (8-12% nickel content) spot prices at 1,000-1,010 yuan ($158-160) per nickel unit on March 20, slightly lower than an assessed price of 1,010-1,030 yuan per nickel unit a week earlier, but still 11% or around 100 yuan higher than 890-920 yuan per nickel unit on December 19, 2017.
The three-month nickel price stood at $13,515 per tonne as of 11.07am London time on Thursday March 22, 6% lower than highs of $14,420 per tonne on February 15 in the first quarter, but still 26% higher than the lows of $10,740 per tonne on December 06.