Chinese nickel pig iron industry in 2008

In a review of Chinese nickel pig iron industry developments in terms of production output as well as cost analysis in 2008, recoverable nickel from nickel pig iron will be 110,000 tones up by 29.4%YoY from 85,000 tones in 2007. However, nickel ore imports will come down from the 15.6 million tones hit in 2007 to 12.0 million tones to 13.0 million tones in 2008 due to a large amount of ore inventory carried over from the previous year and higher grades.

Breakeven costs for nickel pig iron are rising due to rising nickel prices and also higher coke input costs. Chinese coal mining and weather problems, leading toward a severe shortage of coke and the surge in coke prices, have placed a critical upward pressure on nickel pig iron production costs. We estimate that for 7% nickel content pig iron, the rise in coke prices over the past six months has almost doubled the coke input value from an estimated USD 4,300 per tones nickel in H1 2007 to over USD 8,000 per tones nickel in 2008.

SHFE copper prices made marginal gains last week despite strength on the LME. The front month copper contract ended at CNY 67,900 per ton up by 0.6% from the previous week. SHFE aluminum prices rose marginally last week despite the price hike on the LME. The front month aluminum contract closed at RMB 19,710 per ton modestly up by 0.6%WoW.

Chinese spot steel prices rose for the second consecutive week after the Chinese New Year holiday. The hot rolled steel price rose by 4%WoW to USD 644 per ton and the cold rolled coil price was up by 7.3% to USD 793 per ton ex-Vat. The rebar price hit USD 576 per ton over the past week, registering a 2.3%WoW increase and plate price was up by 5.6%WoW to reach USD 698 per ton ex-Vat.