Nickel Market Changed Like Roller Coaster in 1H    

Worldwide nickel output was reportedly 682 600 tons in the first half of the year, an increase of only 4.7% over the same period of last year. Despite a drastic price rise of nickel compared with the same period of last year, the output around the world grew relatively little, showing that nickel producers take a cautiously optimistic attitude toward the rising price of nickel.
   According to the China Nonferrous Metal Industry Association, China produced 82 731 tons of electrolytic nickel in the first half of 2010, an increase of 7.19% over the same period of last year, coming mainly from Jiangsu Jiangli Sci-Tech Co Ltd and Guangxi Yinyi Mining & Metallurgy Technology Co Ltd - both using wet-process red soil nickel ore smelting technology. On June 23rd a ceremony for establishing the Guangxi Jinchuan Nonferrous Metal Co Ltd and launching a Jinchuan nonferrous metal project was held by Jinchuan Group Ltd in Fangchenggang city of Guangxi region, southern China. The RMB30 billion project includes a 600 000 t/a copper smelting unit and matched facilities, a 110 000 t/a nickel products facility and other units for process copper, nickel and chemical products, aiming to become a world class nickel/copper smelting and production base. Jinchuan Group Ltd fulfilled 49.9% of its yearly production goal of nickel and 55.7% of its yearly overall production goal of metals in the first half of this year and also fulfilled 67.1% of the yearly sales revenue goal. Nevertheless, the company warns that the situation in the second half of the year will be more difficult.
   Jilin Jien Nickel Industry Co Ltd (SZ: 600432), the biggest nickel salt producer in China, announced in August that it is conducting trial production of a 5 000 t/a electrolytic nickel project that is expected to start normal operation in September. The company will use the old smelting system to produce refined nickel iron in the new line that will produce 1 000 tons a month of nickel iron, containing 10%-15% nickel. Jilin Jien Nickel Industry Co Ltd completed the acquisition of Goldbrook ventures Inc of Canada in May and will invest RMB755 million, raised through non-open issuance, in the Canadian factory to expand exploration of nickel reserves. On August 31st, the Shenzhen listed company reported its 1H results. The sale revenue was RMB808 million, growing 85.66% from the prior-year period. Of that, 58.7% or RMB474.8 million came from the nickel sulfate business, which recorded a gross margin of 32.93%, compared with the gross margin of 23.41% in 1H 2009. The sale of nickel sulfate grew 83.1% year on year. The net income was RMB77.87 million, four times that of 1H 2009.
   Xinjiang Xinxin Mineral Co Ltd, controlled by Xinjiang Nonferrous Metal Group Corporation, held a ceremony on June 4th for starting construction of a 4 000 t/d ore dressing project at Huangshan Copper/Nickel Mine, which is operated by Xinjiang Xinxin Mineral Co Ltd's subsidiary Yaks Resources Development Co Ltd. The Huangshan mine has been proved to hold reserves of 84 million tons of copper/nickel ores, 380 000 tons of nickel, 220 000 tons of copper and 32 000 tons of cobalt, with a potential economic value exceeding RMB50.0 billion. Huangshan copper/nickel resources development and utilization project was launched at the end of 2008. Total investment in the project is planned to be RMB1.0 billion. According to the program, the first-phase 4 000 t/a ore dressing project will be completed at the end of September 2011 and the second-phase ore dressing project will be completed in October 2013. An ore dressing capacity of 6 500 t/d and 2.0 million t/a will ultimately be formed.
   As the role played by nickel iron in stainless steel smelting is getting more and more important, the monthly nickel iron and nickel ore import of China is increasingly essential. China imported 9.8 million tons of nickel ore in 1H, an increase of 4.4 million tons or 81.5% over the same period of last year, and 70 600 tons of nickel iron with a drop of 54 800 tons or 43.7%. Judging from the monthly import trend, there is also a polarity between the import volume of nickel ore and the import volume of nickel iron.
   The abnormity in the import trend of nickel iron and nickel ore is closely related to the development of the nickel iron sector in China. With the recovery of the stainless steel sector, the production of nickel iron in China has also started rehabilitation. Faced with the unjustified excessive mining of nickel sulfide mineral and the lack of red soil nickel ore resources in China, quite a few stainless steel enterprises have implemented an internationalization strategy of and actively invested in developing overseas red soil nickel ore resources. Some stainless steel enterprises have also installed their own nickel iron smelting equipment and used the tactic of importing nickel ore from abroad to produce nickel iron and consuming it in their own enterprises. Compared with the direct purchase of nickel iron from abroad, this mode is undoubtedly an easier way to cut costs. Moreover, the rapid expansion of the nickel iron capacity in China will surely trigger fierce competition and induce measures to restrict the price of nickel iron. All these factors have led to the present status of reduced import of nickel iron and increase import of nickel ore in China.
   The apparent consumption of nickel in China was 252 000 tons in the first half of this year and is expected to reach 513 000 tons for the whole year. Actual consumption is predicted to be 454 000 tons this year, and the country's combined inventory will be increased by nearly 60 000 tons.