* Jinchuan Group blames technical problem at oxygen facility
* Cut in concentrate imports could support global spot
* Jinchuan's production of copper and nickel likely to fall
* Chairman Yang expects nickel prices to rise on outage
(Recast with chairman comments on outage and prices)
By Polly Yam
HONG KONG, March 19 Jinchuan Group,
China's third-largest copper producer, has declared force
majeure on some copper concentrate purchases after a technical
problem reduced the use of the raw material.
The force majeure will cut Jinchuan's imports of contracted
concentrates, which could support processing fees in the global
copper concentrate market, as the firm's suppliers resell the
shipments. The fees are paid by global miners to smelters.
The technical problem would keep Jinchuan from hitting 2014
target output levels of 150,000 tonnes of nickel and about
400,000 tonnes of copper in the northwestern province of Gansu,
the firm's chairman Yang Zhiqiang said.
The company was still assessing how much production would be
lost and which metal to prioritize during the breakdown, Yang
told Reuters in Hong Kong.
Jinchuan said in a statement earlier that a system used to
produce oxygen had broken down. Such facilities typically supply
the furnaces to melt concentrates.
The technical problem is expected to reduce Jinchuan's
production of copper and nickel for the next three to four
months, about how long it would take to repair the system, said
an industry source.
Jinchuan is also China's top producer of nickel and platinum
group metals, and the problem could buoy London Metal Exchange
nickel prices that are already at 11-month highs.
Global nickel prices could also rise further with
Indonesia's ore export ban in place, Yang said. The ban and
China's tougher environmental requirements could force 70-80
percent of China's nickel pig iron capacity to close by the end
of the year, he said.
China is the world's top producer of nickel pig iron, a low
grade ferro-nickel used to replace refined nickel.
Jinchuan did not specify the amount of concentrate affected
by force majeure and said it would notify suppliers on the
Force majeure is a clause included in contracts that removes
liability for natural and unavoidable events that prevent
companies from fulfilling their obligations.
Jinchuan has two oxygen supply systems at its headquarters
in Gansu. The systems supply copper and nickel furnaces, said
the industry source, who declined to be named because he was not
authorized to speak to the media.
The source did not estimate the production loss, but said
Jinchuan did not buy large amounts of nickel concentrates and
ores since it owns the biggest nickel mine in China.
Before the breakdown, Jinchuan operated a capacity to
produce about 400,000 tonnes of copper and 140,000 tonnes of
nickel a year in Gansu.
Another 200,000 tonnes of copper capacity in Gansu was shut
by Jinchuan last year due to shortages of copper scrap, an
alternative for concentrate. The firm is in the process of
upgrading that capacity, Yang said.
The firm has an additional 400,000 tonnes of copper capacity
in the southwestern region of Guangxi, which is in a trial phase
and has not yet started commercial production.
Global commodity trader Trafigura said last month it would
buy 30 percent of that capacity. [ID: nL3N0LQ0XH]
(Reporting by Polly Yam; Editing by Ed Davies)