Nickel Pig Iron Producers Try To Cut Costs In A Weakening Market
Posted Thursday, 20th June 2013
By: Original report by Reuters 19th June 2013
SINGAPORE/LONDON - China's nickel pig iron producers are turning in amass to a new technology in a bid to survive the crumbling prices of nickel, already flagging at four-year lows, and could fall further.
Nickel prices are now nearing $14 000/t, however, production cuts by marginal producers with higher costs could steady the market.
Nickel, mainly used to make stainless steel, is down 17% this year. It is the worst performer of a industrial metals complex hit hard by China's slowing growth and Europe still in the doldrums.
Generated by the general world boom, prices peaked above $50,000/mt in 2007.
This in turn led to the start of production of nickel pig iron in China, a cheaper substitute for pure nickel and used as feedstock by stainless steel mills. The production of nickel pig iron has more than quadrupled to an estimated 400,000 metric tonne this year from 89,000 t in 2008, according to analysts.
The break-even cost for nickel pig iron produced by rotary kiln electric furnace (RKEF) technology is now as low as $12,500 per metric tonne and its market share has increased, said a senior VP for marketing and strategic planning at Nickel Asia Corp.
Rotary Kiln Electric Furnace technology uses about less power than more conventional production methods.
Nickel Asia Corp. claims to be one of the world's lowest-cost producers of nickel laterite ore, which is u used in the production of nickel pig iron, 60% of their laterite ore is shipped to China.
WILL THERE BE PRODUCTION CUTBACKS?
The rise of nickel pig iron, produced by Rotary Kiln Electric Furnace plants in particular, has won market share from refined nickel in China and now there is a new producer entered the market from Indonesia.
"The trouble with cutbacks among the Nickel Pig Iron plants, is that it's extremely hard to monitor what's happening and the news only filters out secondhand," said one analyst.
Data this week from the International Nickel Study Group was the latest evidence of a market also burdened by overproduction outside of China.
The nickel market recorded a surplus of 32,900 metric tonne during the first four months of the year.
There has been a forecast of a yearly surplus of 90,000 metric tonne of nickel this year.
JP Morgan has estimated that nickel pig iron's market share in 300 series stainless steel will increase to over 90% in the next few years from 75% at present as it ramps up its exports to South East Asia and Europe.
The stainless steel industry, also suffering from huge over capacity, is approaching the seasonally weaker summer months.