Glencore raises nickel production guidance for 2018 on Koniambo ramp-up; FY2017 output drops 5%

Glencore has set its 2018 production guidance for own-sourced nickel in 2018 at 127,000-137,000 tonnes of nickel metal, much higher than it produced in 2017, according to its production results report published on Thursday February 1.

Market participants attribute the higher guidance to the ramp-up of Koniambo after its No 2 furnace was rebuilt in December.

Glencore produced 109,000 tonnes of nickel metal from own-sourced material in the full year of 2017, down 5% year on year.

The fall in production was attributed to changes in the use of third-party versus own-sourced feeds in the integrated nickel operations (INO) circuit, partly offset by a strengthening operational performance at Koniambo.

Total nickel production, including that produced from the third-party feed, fell 4% in an annual comparison.

Koniambo ferro-nickel
Output at Koniambo rose 29% year on year in 2017 to 17,500 tonnes of own sourced nickel, reflecting efforts to steadily improve the plant’s operating performance towards capacity expectation levels.

Rebuilding of the direct current furnace No 2 was completed last year, with first metal tapped in December. Progressive testing and a ramp-up process will continue in the coming months, Glencore said.

Ferro-nickel output at the project rose to 5,200 tonnes in the fourth quarter.

“Ferro-nickel from Koniambo’s content is slightly above 50% nickel content. The content is higher than the most liquid ferro-nickel which has 26-32% nickel metal, but it is still widely used in the Chinese stainless steel sector,” a source familiar with the situation said.

“Since Beijing increased the import tax for melting refined nickel to 2%, stainless steel mills are preferring to use ferro-nickel to reduce costs, so Koniambo ferro-nickel will have a brighter future in China than in previous years,” a second market source said.

Metal Bulletin assessed the premium for ferro-nickel with 26-32% nickel metal cif China at $170-350 per tonne based in January, unchanged from December’s level, due to a quiet market because all producers have booked their cargoes in the first quarter with Chinese major stainless steel mills.

INO circuit’s Nikkelverk full plates
Glencore’s own-sourced integrated nickel operations (including Sudbury, Raglan and Nikkelverk) contributed 57,500 tonnes of nickel metal, 13% lower than in 2016, mainly due to a higher proportion of third party feeds in the production mix.

Total production including third-party feed in the INO circuit was 87,100 tonnes in the full year of 2017, down 7% compared with 2016.

Nikkelverk’s INO full plates mainly feed the electroplate sector, a source familiar with the situation told Metal Bulletin.

“Top nickel full plate producers, including Norilsk Nickel, Vale, Jinchuan and Sumitomo, all cut some production in 2017, which means these suppliers all offered very high premiums for long contracts cif China in 2018,” a senior nickel analyst based in Beijing said.

Market participants attributed the fall in Nikkelverk full plates production to the supply bottleneck of nickel sulfide concentrate and intermediate nickel products.
“The tight supply of nickel sulfide concentrate is the fundamental reason for higher premium offers from nickel full plate suppliers in 2018,” the senior nickel analyst added.

Murrin Murrin briquettes
Glencore reported a 3% drop in own-sourced nickel production at its Murrin Murrin project to 34,100 tonnes in the full year of 2017, mainly reflecting the maintenance shutdown in the first half of 2017.

“Briquettes from Murrin Murrin have drawn more attention from market participants in 2018 due to the bright future of battery and electrical vehicle sector and their duty-free status under the free trade agreement between China and Australia, especially after Beijing started charging higher import tax on refined nickel in 2018, " a Shanghai nickel trader said.

Metal Bulletin assessed nickel briquette premiums cif China duty-paid at $120-140 per tonne, flat on previous week, with the wide negative arbitrage between the LME and Shanghai nickel briquettes price still deferring buying interest.

No deals were heard for duty-free briquettes from Australia in the past week because of the very tight supply of spot cargoes, while most material has been signed by long contracts.

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