see article below,IMHO nickel prices should start to find support in low USD30k area if chinese cut nickel pig iron production which this article says is starting to happen.
Low Prices Force Nickel Pig Iron Producers to Cut Production
By Erik Dahl 13 Jul 2007 at 10:40 AM GMT-04:00
SHANGHAI (Interfax-China) -- China's nickel pig iron producers have been forced to either cut or suspend production due to recent low prices and decreased demand from downstream stainless steel mills, industry insiders told Interfax yesterday.
"We are considering cutting nickel pig iron production in the coming months, as downstream demand has shrunk with the price of nickel," said an anonymous official from privately-owned Zhejiang Huaguang Group, China's largest nickel pig iron producer, which is capable of producing 1 million tonnes of nickel pig iron per annum, with a nickel content varying from 1% to 14%.
"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.
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 said.
The company supplies approximately 700,000 tonnes of nickel pig iron to stainless steel smelters per year through long-term contracts.
Many small nickel pig producers in the provinces of Shandong, Sichuan and Fujian have been forced to reduce or suspend production, according to the official.
The price of nickel pig iron (grade 4% to 6% nickel) fell sharply from a peak of RMB 2,600 (US$343.01) per tonne unit (1 unit represents 1% nickel content) in May, on the back of all-time high prices on the London Metal Exchange (LME), to a current RMB 2,000 (US$263.85) per tonne unit, said Wang Lixin, an analyst with Beijing Umetal, a leading domestic metal consultancy.
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, Wang said.
The three-month nickel price on the LME fell to US$33,350 per tonne yesterday, from a peak-high of US$51,500 per tonne on May 9, representing drop of 35.24%.
Reduced production and product prices from domestic stainless steels mills are also weighing on the nickel pig iron market.
Last year, domestic stainless steel mills began to use low-grade nickel pig iron (grade 5% nickel) 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.
"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," Wang said.
She claimed that small nickel pig iron plants have flexible production structures and can easily adapt to market demands. "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," she added.
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. However, Wang further commented that few Chinese companies are able to directly purchase laterite ore in those countries due to strict local government resource export policies.
The price of imported laterite ore has tumbled rapidly along with the downturn in nickel prices. The delivery price of Philippine laterite ore (grade 1.8% nickel) in China's major ports fell from RMB 1,750 (US$230.87) per wet tonne one month previously, to RMB 1,580 (US$208.44) per wet tonne yesterday. Low domestic nickel pig iron production results in high laterite ore stockpiles in major Chinese ports, according to Shanghai Mysteel.
This article comes from Interfax China Commodities Daily, a daily digest produced by Interfax News Agency in Mainland China. To receive 10 free copies of this, please e-mail [email protected].
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