China s Nickel Industry

China s Nickel Industry

Main Contents 1 Chinese nickel supply 2 Chinese nickel consumption 3 SS industry

Chinese refined nickel supply Nickel metal and nickel salt production CAGR of refined nickel production in 2010~2013: 26% In 2013, China s nickel cathode production was 199.6kt-Ni at a growth rate of 6.6%. The production increase was mainly from Jinchuan Non-ferrous Metal, Jiangxi Lithium and Sichuan Ni&Co Guorun New Materials. Data source: BGRIMM

Nickel cathode/utility capacity Company Jinchuan group JiEn Nickel Fukang smelter SiChuan Nike Guorun GuangXi Yinyi Yunnan YuanJiang Nickel Shaanxi Huaze Ni&Co Metal Inco-Dalian Total Capacity (kt/a) 170 7 13 25 10 5 5 35 270 Raw material source Nickel Concentrate+MHP+MSP Nickel Concentrate+Laterite ore+mhp Nickel Concentrate Laterite ore+mhp Laterite ore+mhp Laterite ore Laterite Ore+MHP+MSP Laterite Ore Data source: BGRIMM China s Nickel cathode/utility capacity is about 270kt/a now. Hydrometallurgy plants rely on laterite ore or MHP/MSP as material With nickel price pick up, we will see higher capacity utilization in 2014.

Chinese nickel pig iron production 600 500? Unit:kt-Ni 400 300 200 CAGR 40% 100 0 2007 2008 2009 2010 2011 2012 2013 2014(f) Data source: BGRIMM Ni pig iron production in 2013 : 464Kt-Ni. CAGR of Ni pig iron production during 2007~2013: over 40% NPI production in 2014-Indonesia ban implemented since 12th Jan However, with high laterite ore stock in ports and strong demand from stainless steel production, NPI production in 2014 will keep increasing to around 500kt.

NPI production by types Unit:kt-Ni 450 400 350 300 250 200 150 100 50 0 2010 2011 2012 2013 1.5~2% NPI 4~8% NPI 10~15% NPI >=20% FeNi The ratio of high grade NPI has been increasing in latest 4 years. In 2013, high grade NPI took more than 80% total nickel content in NPI production. High grade NPI increase with a fast rate. While RKEF producers contribute the more than half of high grade NPI production.

NPI market RKEF grow to the most important process with its low operation cost High grade NPI took more than 80% OF Ni content in the total NPI production in 2013. High laterite ore stock in China s ports will keep the NPI industry going in 2014 NPI production may reach around 500kt in 2014. About 300kt-Ni NPI production will be at risk in 2015 because of Indonesia s ban Because of the Indonesia ban, Chinese high grade NPI producers are expecting continue increase of nickel price and NPI price. So they are reluctant to sell, which bring NPI market from buyer s market in 2013 to seller s market in 2014.

Laterite ore Imports China s laterite ore import by year 2009~2013 Obvious import increase since 2012 80,000 70,000 60,000 50,000 40,000 kt-wet 7,000 6,000 5,000 4,000 unit:kt-wet 30,000 20,000 10,000 0 2009 2010 2011 2012 2013 Philippines Indonesia 3,000 2,000 1,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2010 2011 2012 2013 2014 Philippines Indonesia Total laterite ore import in 2013 was 70.8Mt.Imports from Philippine and Indonesia respectively accounted for 41% and 58%. Since May 2012, China s producers and traders started to import more laterite ore due to the possibility of Indonesia s ban policy.

Lateriteore stock changes in Chinese major ports Laterite ore stock in China's main ports 20000 15000 10000 5000 0 2012/7/26 2012/8/26 2012/9/26 2012/10/26 2012/11/26 2012/12/26 2013/1/26 2013/2/26 2013/3/26 2013/4/26 2013/5/26 2013/6/26 2013/7/26 2013/8/26 2013/9/26 2013/10/26 2013/11/26 Tianjin port Rizhao port Lanshan port Lianyungang port Jintang port Unit:kt-wet

Total laterite ore stock Laterite ore in China s 7 major ports is over 27 Million t by end Feb. Laterite ore inventory hold by plants is also in high level, around 10~15 Million t. By February, Tsingshan FuAn s (10% grade NPI capacity 500kt/a) laterite ore stocks could meet its about 6~7 months demand, Shandong Xinhai (400kt/a high grad e NPI +150kt/a low grade NPI capacity) holds around 6 months laterite ore stocks in hand. Delong Nickel (500kt/a NPI) with the least of about 4 months consumption. Total laterite ore ore stock now is still around 40 Million t.

Chinese nickel pig iron production Current situation Big NPI plants hold high laterite ore inventories Large quantity of laterite is stockpiled in ports Environmental inspection in Inner Mongolia forced lots of plants shut down Most production is from the integrated NPI plants NPI producers are now also holding high NPI stock in hand Due to Indonesia ban Big NPI producers are consuming their own stock, not yet turn to ports for laterite ore Severe Environment requirement in 2014 and next years NPI producers are expecting high price because all of them hold optimistic view on nickel price

Nickel cathode/feniimports Unit:kt 300 250 200 150 100 50 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2010 2011 2012 2013 Import Export 0 Jan. Feb. Mar. Apr. May. Jun. Jul. Aug. Sep. Oct. Nov. Dec. 2011 2012 2013 2014 In 2013,the increased NPI usage by stainless steel plants resulted China s nickel cathode import and FeNi import dropped by 2% YoY and 20% YoY respectively. FeNi import satyed in high level since September 2013, because stainless steel plants want to reduce their risk of exposing to Indonesia ban. But due to 1% import tax imposed since Jan 2014, we may just cathode import grow slightly.

Chinese nickel pig iron production Chinese invested overseas NPI projects Lots of Chinese companies has submitted the plan to Indonesia government of setting up smelters. Three are doing the construction and other nine possible projects are in early stage. Tsingshan s project will be commission early 2015. No laterite ore arrivals from Indonesia after Feb 2014 Cutting sea freight cost Exempting export duty of NPI Rich coal resource in Philippines and Indonesia Increased production cost in China

Chinese nickel import and export Kt-Ni Chinese primary nickel im& ex kt-ni China is a net importer of refined nickel. Net import was 127,918t in 2013. The import was peaked at 212kt in 2011 and decreased to 168kt in 2013. Import tariff of refined nickel rose from 0 to 1% from 2014. The net import might be decreased in this year.

Chinese nickel consumption Breakdown of Chinese Nickel Consumption Battery Alloy and casting Others Electroplating Stainless steel Data source: BGRIMM Stainless steel is the biggest nickel consumer in China. Nickel consumption in stainless steel industry increased from 74% in 2009 to 85% in 2013.

Chinese stainless steel production Kt Chinese stainless steel production kt Unit:kt 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2009 2010 2011 2012 2013 40% 35% 30% 25% 20% 15% 10% 5% 0% Data source: BGRIMM Data source: BGRIMM SS production Growth rate SS production reached 19.2Mt in 2013, up by 22%YoY. Stainless steel production may double counted by some plants in China In 2014, growth rate will slow down to 10%~15% YoY.

Chinese stainless steel production 100% 90% 80% 26.7% 25.8% 22.5% 21.5% 70% 60% 50% 40% 30% 20% 10% 30.7% 42.6% 27.4% 30.1% 26.1% 46.8% 47.5% 49.3% 0% Data source: BGRIMM 2010 2011 2012 2013 300 series 200 series 400 series The proportion of 300 series increased to 49.3% in 2013 while the 200 series ratio deceased obviously to 26.1% When nickel price is low, 300 series is preferred. However, high grade NPI which is mainly for 300 series stainless steel is tight and will be tighter in market due to Indonesia ban. And nickel price will be back to high level. We may see this structure changed in next few years.

Chinese nickel consumption Chinese nickel usage in SS industry SS Scraps 18% Primay Ni usage (ex.npi/feni) 20% NPI/FeNi usage, 59.8% NPI/FeNi usage in 300 series 47% NPI/FeNi usage in 200 series 15% Data source: BGRIMM Ni cathode, NPI/FeNi and SS scraps are Ni sources for SS production. Around 54% of nickel demand for SS production was from NPI in 2013

Chinese nickel consumption The comparison of Ni materials for stainless steel Ni materials Ni grade Supply market Economy Refined Ni metal/utility nickle >98% Domestic/import Non of Fe, Cr FeNi >28% Most from imports NPI low/medium grade NPI: 1.5~7% High grade NPI(SBF): 7~15% Sufficient supply in domestic market Domestic market Free Fe,Cr Free Fe,Cr 200/300 series SS scraps 4~12% Dependence on import, tight supply Lower energy cost

Chinese stainless steel market Nickel price increased; NPI price followed but with a lower rate, stainless steel price did not follow. Margin of stainless steel producers narrowed down. Demand has not improved after Spring Festival. Flat demand and falling profit resulted some producer are struggling. China s stainless steel production growth are slowing down. NPI will continue to be the main Ni source for SS production in 2014 while more producers are looking for scrap and FeNi Scrap usage will increase in 2014 and in next few years

Thanks for your attention! CUI Min Email: cuimin@bgrimm.com Tel: +86-10-63299741 Fax: +86-10-63299744 BGRIMM Beijing General Research Institute of Mining & Metallurgy 2014/3/27