Nickel pig iron A long term solution?

Robert Cartman - Hatch

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Contents

History of the NPI industry

Present situation
Next few years...
Conclusions

Hatch Associates Limited, 2012

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Chinese NPI production really started to take off in 2006/07 as the LME nickel
price rose to record highs

Dec 2011

Aug 2011

Apr 2011

Dec 2010

Apr 2010

Aug 2010

Dec 2009

Aug 2009

Dec 2008
Apr 2009

Aug 2008

Apr 2008

0
Dec 2007

Aug 2007

10,000

Aug 2006

50

Dec 2005
Apr 2006

20,000

Aug 2005

100

Apr 2005

30,000

2011

150

2010

40,000

2009

200

2008

50,000

2007

250

2006

60,000

2005

300

Dec 2006
Apr 2007

LME Ni price ($/tonne)

Chinese NPI production (kt nickel content)

Source: Antaike, MB, Hatch

Hatch Associates Limited, 2012

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Nickel pig iron now accounts for more than 30% of Chinas primary nickel
consumption, up from just 2% in 2005
Chinese primary nickel consumption by source, kt
600

500

400

300

200

100

0
2005

2006

2007
Nickel Cathode

2008
Nickel Salt

NPI

2009

2010

Net Imports

Source: Antaike, China Customs, Hatch

Hatch Associates Limited, 2012

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Taken as a whole, Chinas NPI industry rivals the major nickel players such
as Norilsk and Vale

Share of nickel processing capacity, 2011

Vale
13%

Emergence of NPI in 2006/07 as Ni prices

rose

Other
26%

Quick/simple method of backward integration

Norilsk
13%

NPI now accounts for more than 30% of

Chinas primary Ni consumption

Queensland
Nickel
4%
Eramet
3%
Anglo
American
4%
Japanese
4%

Cheaper/easier than bringing other greenfield

projects on stream

China NPI*
12%

Xstrata
5%

Jinchuan
8%

*China NPI = actual production, not capacity

Source: Company reports, Hatch

BHP
8%

The industry as a whole rivals Norilsk/Vale in

terms of size

But...

Still very fragmented

In a process of change

Faces threats particular to NPI industry

Hatch Associates Limited, 2012

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Contents

History of Chinas NPI industry

Present situation
Next few years...
Conclusions

Hatch Associates Limited, 2012

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Currently, all NPI producers are equipped with either BF (Blast Furnace) or
SAF (Submerged Arc Furnace) technology, and production capacity of most
producers is below 10kt per year
Major Chinese NPI Producers (ktpy Ni contained)
Location

Process

Product

Capacity
(Ni Content)

Shandong Haixin

Shandong

BF, SAF

NPI (10-15% Ni)

30

Zhanhua Weiye Nickel Industry

Shandong

SAF

NPI (10-15% Ni)

20

Inner Mongolia

SAF

NPI (10-15% Ni)

20

Fujian Dingxin (Tsingshan Holding Group)

Fujian

SAF

NPI (10-15% Ni)

20

Jiangxi Jiangli

Jiangxi

PAL

Nickel Metal

15

Guangxi Yinyi

Guangxi

PAL

Nickel Metal

12

Shandong

BF

NPI (6-8% Ni)

10

Xuzhou Jinxiang Metallurgy

Jiangsu

SAF

NPI (10-15% Ni)

10

Chaoyang Haotian Non-ferrous Metals

Liaoning

BF + EF

Matte

10

Shanxi Dakang Group

Shanxi

BF

NPI (4-6% Ni)

Henan Qingpu (Tsingshan Holding Group)

Henan

BF

NPI (4-7% Ni)

Sichuan

SAF

NPI (10-12% Ni)

Anhui

SAF

NPI (10-15% Ni)

Guangxi Xinheli

Guangxi

BF

NPI (1-2% Ni)

Sichuan Jinguang Group

Sichuan

BF

NPI (1-2% Ni & 4-6% Ni)

Fujian Xin'anjiang Nickel Alloy

Zhejiang

SAF

NPI (10-15% Ni)

Company

Inner Mongolia Shangdu Industry Park

Zhanhua Hugo Dragon Metal Limited (Zhanhua

Qingxiang)

Sichuan Jinguang Group

Huaibei Xinyuan Ferronickel Smelter

Total

188

Source: Antaike, company reports, Hatch

Hatch Associates Limited, 2012

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Chinese NPI producers are mainly located in Shandong, Shanxi, Inner

Mongolia and Jiangsu. Linyi in Shandong province is the largest NPI
producing region
Distribution of NPI producers in China

Many NPI producers in Inner Mongolia

previously smelted other alloys (e.g.
FeSi, FeMn) and use SAF technology

Inner Mongolia

Shanxi
Shandong

Some NPI producers in Shandong,

Jiangsu and Fujian relatively new with
SAF facilities built in recent years and
have larger production capacity

Jiangsu

Fujian

BF NPI producers are mainly located in

Shandong, Shanxi and Jiangsu, and
these BFs were previously used to
produce pig iron. These operations
under threat from government closures

Source: Hatch field research

Hatch Associates Limited, 2012

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

The Chinese NPI industry is almost completely reliant on importing nickel

ore from Indonesia and the Philippines at present
Chinese nickel ore imports by country, kt gross weight)
30,000

25,000

20,000

15,000

10,000

5,000

0
2004

2005

2006
Philippines

2007
Indonesia

2008

2009

2010

Others

Source: China Custom, Hatch

Hatch Associates Limited, 2012

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

The nickel ores imported from Indonesia and the Philippines generally
supply different customers given the variance in grade
Chinese laterite ore imports, 2010
Mt
20

$/t
70

18
60
16
50

14
12

40

10
30

8
6

20

4
10

Indonesia and Philippines the key sources of

laterite ore for NPI producers

Ore imported from Indonesia generally
higher-grade i.e. >1.5% and favoured by
SAF producers

Ore imported from Philippines generally
lower-grade i.e. <1.7% and used largely by
BF producers

2
0

0
Philippines
Imports (LHS)

Indonesia
CIF price (RHS)

Source: China Customs, Hatch

Hatch Associates Limited, 2012

10

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Producing NPI via electric furnaces has become more popular as the
government has targeted small blast furnaces for closure

Chinese NPI production by process route

2008

2010

2011

14%
33%

35%
45%

65%

41%

SAF

BF

67%

Other

Source: CBIChina, Hatch

Hatch Associates Limited, 2012

11

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

NPI production has shifted toward higher-grade material as the industry has
matured and the use of electric furnaces has become more widespread
Chinese NPI production by grade (based on nickel content)
2009

2010

18%

39%

40%
< 2% Ni
4-8 % Ni
> 10% Ni

52%

30%

21%

The reduction of low grade (<2%) nickel NPI is because:

a) the government has been shutting down some mini BFs; and b) low grade nickel NPI has a relatively small market
Source: TISCO, Hatch
Hatch Associates Limited, 2012

12

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

More than 600kt of new NPI production capacity has been announced and this will
have a big impact on the nickel ore markets
Planned NPI projects in China (ktpy nickel contained)
Location

Process

State

Capacity
(Ni Content)

Sinosteel

Hebei

PFK*

Phase I, commissioned in 2011

15

Sinosteel

Hebei

PFK*

Phase II, planning

45

Guangxi

RKEF

Planning

100

Jien Nickel

Inner Mongolia

RKEF

Phase I, commission in 2013

20

Jien Nickel

Inner Mongolia

RKEF

Phase II, planning

80

Macrolink Group

Guangxi

RKEF

Planning

50

Sichuan Jinguang Group

Guangxi

RKEF

Commission in 2013

50

Guangdong

RKEF

Commission in 2012

50

Anhui

RKEF

Commission in 2013

20

Hanking Group

Liaoning

RKEF

Phase I, commission in 2013

30

Hanking Group

Liaoning

RKEF

Phase II, planning

30

Delong Nickel Industry

Jiangsu

RKEF

Commission in 2012

20

Taiwan E-United Group

Fujian

RKEF

Planning

30

Fujian Fufeng

Fujian

RKEF

Planning

50

Ruitian Steel

Fujian

RKEF

Planning

30

Company

JNMC

Guangdong Guangxin Holding Group

Anhui Tenglong Alloy

Total

620

*Pobuzhsky ferronickel plant process: old ferronickel process developed in the Ukraine
Source: Antaike, company reports, Hatch

Hatch Associates Limited, 2012

13

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Contents

History of Chinas NPI industry

Present situation
Next few years...
Conclusions

Hatch Associates Limited, 2012

14

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

The Chinese NPI industry is almost completely reliant on importing nickel

ore from Indonesia and the Philippines at present
Chinese nickel ore imports by country, kt gross weight)
30,000

25,000

20,000

15,000

10,000

5,000

0
2004

2005

2006
Philippines

2007
Indonesia

2008

2009

2010

Others

Source: China Custom, Hatch

Hatch Associates Limited, 2012

15

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Should Indonesia ban the export of nickel ores, the Chinese NPI industry
may become even more reliant on the Philippines for ore supply
Nickel reserves and resources, Mt nickel content
35
30
25
20
15
10
5
0

Laterite reserves

Laterite resources

Sulphide reserves

Sulphide resources

Source: Metalytics, USGS, Hatch

Hatch Associates Limited, 2012

16

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Thoughts and conclusions

NPI has grown to become a major source of primary nickel

Will remain but is constantly evolving and maturing as an industry

Likely to eventually consolidate into larger producers, producing material similar to a FeNi

Another 400-500kt of primary nickel will be needed over the next 15yrs to satisfy Chinas likely
increase in demand

unless there is a sharp increase in the scrap ratio

NPI industry faces threats, most notably at the moment the Indonesian ban on nickel ore exports

will have to find alternative supplies, perhaps from further mining expansion in Philippines

smelters to backward-integrate, purchase mining rights in countries with laterite resources?

Hatch Associates Limited, 2012

17

3RD EURONICKEL CONFERENCE, HELSINKI, 2012

Contacts for further information

Hatch Beddows Strategy Consulting



9 Floor, Portland House, Bressenden Place, London SW1E 5BH

+44 20 7906 5100 (switchboard)

Robert Cartman
Consultant


+44 20 7906 5119

Fax

+44 20 7963 0972

rcartman@hatch-europe.com

Hatch Beddows is a member of the HATCH GROUP of companies

Hatch Associates Limited, 2012

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