April 9, 2014 / 8:37 AM / in 4 years

China nickel pig iron plants likely to cut output as ore prices soar

* Philippine laterite ores at about $90/WT now vs $50/WT in late Feb

* Rise largely driven by Indonesia ban on ore exports

* Prices for stocks at China ports up more than 15 pct

* Nickel pig iron prices only up about 10 pct on lukewarm demand

By Polly Yam

HONG KONG, April 9 (Reuters) - Producers of an alternative to refined nickel in China are expected to cut output as prices for ore imports have nearly doubled since end-February in the wake of a ban on shipments by top exporter Indonesia.

Reduced supply of nickel pig iron could mean the world’s top consumer of nickel would increase its use of the higher grade refined metal, underpinning global prices that have already risen about 16 percent this year.

China is the world’s dominant producer of nickel pig iron, a low-grade ferro-nickel used in stainless steel output. It is produced from laterite nickel ores that China must import.

Prices have risen to about $90 per wet tonne this week on a CIF China basis for spot Philippine laterite nickel ores with 1.9 percent metal content from about $50 in late February, said traders in China. One of them added that prices had gained 8 percent from $83 last week.

They said the climb was largely due to the Indonesian ban on exports of unprocessed metals that began in January, as Jakarta pushes to transform Southeast Asia’s biggest economy into a producer of finished goods.

Supply from the Philippines, the second-largest supplier to China last year, was also restricted in the first quarter of 2014 by rainy conditions, they said.

And Chinese trading firms, typically the main importers of laterite nickel ores, have not been reselling large volumes of stocks sitting in ports in the hope of further price rises, according to traders and a manager at a nickel pig iron producer.

“Ore prices are too high,” said the manager, who declined to be named as she was not authorised to talk to media. “Nickel pig iron production is likely to be affected in coming months.”

She added that producers of nickel pig iron in China would make a loss if they imported ores now.

China’s monthly production of nickel pig iron was estimated at roughly 40,000-41,000 tonnes of nickel content in January and February 2014, according to figures from information providers umetal.com in Beijing and SMM in Shanghai. SMM’s numbers showed that December output stood at around 45,000 tonnes.

China does not release such data.

Umetal.com figures showed stocks at seven major ports in China fell to 15.74 million tonnes last week, from 16.87 million tonnes in early March and 17.88 million tonnes in early January.

Reflecting strong demand, prices of stocks in Chinese ports have risen more than 15 percent since end-February, trading at about 570-650 yuan ($92-$105) per wet tonne currently for ores with 1.9-2 percent nickel content, traders said.


But prices of nickel pig iron have lagged behind ores due to lukewarm demand from stainless steel mills.

Spot nickel pig iron with 10-15 percent nickel content traded at about 1,050-1,100 yuan per 1 percent of metal on Wednesday, up about 10 percent from February, traders said.

Costs of production for that grade would be about 1,200 yuan based on current ore prices, said the manager at the producing company.

China’s stainless steel sector, struggling with overcapacity, cut production in March due to maintenance, said Wang Lixin, analyst at umetal.com, citing the firm’s poll of more than 25 large and medium-scale stainless steel mills.

Some mills may have brought forward maintenance plans from the summer because of weak domestic demand for their products, Wang said.

China had about 30 million tonnes of stainless steel smelting capacity in 2013, likely to rise by 4 million tonnes this year, according to umetal.com figures. Production stood at 19.6 million tonnes last year. ($1 = 6.1968 Chinese Yuan) (Reporting by Polly Yam; Editing by Joseph Radford)

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