Jerome Baudelet - Eramet Nickel France - Nickel Market: An insider view from a producer

NICKEL MARKET VIEW FROM A PRODUCERChina Nickel Conference, May 24 & 25th

SUMMARY

CHINA NICKEL CONFERENCE, MAY 24-25TH, SHANGHAI, CHINA2

1. ERAMET in a few words

2. Brief on New Caledonia

3. Market Balance 2016

4. NPI production update

5. The Inventory picture

6. Short supply of non-LME nickel units

CHINA NICKEL CONFERENCE, MAY 24-25TH, SHANGHAI, CHINA

3

1. ERAMET IN A FEW WORDS

ERAMET Manganese

46%

ERAMET Nickel22%

ERAMET Alloys32%


4

French mining and metallurgical group operating in

3 divisions and listed on Euronext Paris.

� ERAMET Nickel:

� ≠1 ferronickel producer worldwide

� ≠3 high grade nickel producer worldwide

� ERAMET Manganese:

� ≠2 of high-grade manganese ore worldwide

� ≠1 refined manganese alloys producer worldwide

� ERAMET Alloys:

� ≠2 closed-die forging parts producer

� ≠1 gas-atomized powders producer

Sales breakdown by division (2015)

ERAMET is employing more than 14 000 people, including 5 000 in France.

€3 109

million

A GLOBAL LEADER IN EACH OF ITS BUSINESSES

CONFIDENTIAL

Sandouville refinery (hydromet)

Doniambo smelter(pyromet)

Weda Bay Nickel (mine + plant project)

Nickel mines

Metallurgical plants

Etoile du Nord

Poro

Thio

Kouaoua

Poum

Tiebagi

Népoui-Kopéto

Tontouta

NEW CALEDONIA

FRANCE

FeNi

Ni matte

ERAMET NICKEL

Ni metal

Ni salts

INDONESIA

5CHINA NICKEL CONFERENCE, MAY 24-25TH, SHANGHAI, CHINA


6

2. BRIEF ON NEW CALEDONIA

NEW CALEDONIA


7

� New Caledonia consists in a group of islands in the southwest Pacific Ocean

� It is a French “Territory” (main island 400 km X less 100 km), with capital Noumea

� About 260 000 inhabitants

External picture credit applies

NICKEL REFINING CAPACITY


8

ERAMET - SLN DoniamboSouthern Province

Pyro / Ferronickel + matte

Capacity 60 Kt Ni pa

Own mines on main island

HG saprolite ore

VALE GoroSouthern Province

Hydro / Nickel oxide

Capacity 60 Kt Ni pa (+Co)

Commencement 2009

On-site own mine

Limonite ore

KNS KoniamboNorthern Province

Pyro / Ferronickel

Capacity 60 Kt Ni pa

Commencement 2013

On-site own mine

HG saprolite ore

External picture credit applies

� 3 on-shore metallurgical plants, combined capacity of 180 kt Ni

� 1 “off-shore” metallurgical plant, capacity 54 Kt Ni

� Plant : SNNC (in South Korea), a JV between SMSP (51%) and POSCO (49%)

� Pyro / Ferronickel

� Capacity doubled to 54 Kt Ni end 2014

� HG saprolite ore feed mainly from NMC, a New Caledonia JV between SMSP (51%) and POSCO (49%)

NICKEL MINING LANDSCAPE


9

Nickel mining centersPeridotite massifs

Source : DIMENC

� Aside from KNS, SLN and VALE, 4 permit-owninglocal mining companies :

� MKM – Mai Group

� SMGM - Montagnat

� SMT - Ballande

� NMC

Saprolites Limonites

Cut-off grade 1.50% 2.00% 1.00% 1.40%

Resources (Mt Ni)

21 13 33 20

Reserves (MtNi)

10.5 6.5 16.5 10

NICKEL ORE FLOWS


10

Nickel ore exports by destinationNickel ore exports by destination

0

1

2

3

4

5

6

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Mil

lio

ns

of

WM

T

Others

China

South Korea

Japan

Australia

2 historical customer countries :

� Ore flow to Japan (saprolites) started 60 years

ago

� Ore flow to Australia (limonites) started 28

years ago, hovering around 2 MT pa,

Saprolite ore exports by destinationSaprolite ore exports by destination

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Mil

lio

ns

of

WM

T

Others

China

South Korea

Japan

� Japan: historical partner

� South Korea :

� From 0 in 2007 to 1.7/1.8 MT

� Doubling of SNNC capacity => doubling of

Ni-in-ore requirements

� China : Some irregular exports

NEW CALEDONIA STANCE ON DSO


11

� Recent DSO authorizations to export to China from the New Caledonian Authorities

mainly aim at compensating the loss of volume generated by QNI bankruptcy.

� New Caledonia is a highly regulated territory where export of ore is subject to a

strict administrative process.

� Overall, volume of exports to China will remain limited in the future as New

Caledonia favors local ore processing. Current authorizations only allow for a

maximum of 1.3WMT export volumes.

� Export authorizations concern mostly limonite ore and in all cases the nickel

content shall not exceed 1.65%.

� Exports of ore from New Caledonia are regularly challenged as independentist

parties which to ban entirely.

3.MARKET BALANCE FOR 2016

STAINLESS STEEL PRODUCTION IN 2016


13

� We retain a more optimistic view on stainless steel production with a 3.3% rebound this year. World output should

set a new record high of 42.5 Mt thanks to a recovery in China in Q2.

� The growth shall be fueled almost exclusively on austenitic grades and more particularly on 300 series.

2011

33,2

30,9

2010 2016

42,5

2015

41,2

2012

35,3

2014

41,4

2013

37,8

2010+23.5%

2011+7.5%

2012+6.4%

2013+6.9%

2014+9.5%

2015-0.4%

2016F+3.1%

World yearly stainless steel production, in million tonnesWorld yearly stainless steel production, in million tonnes

-200

0

200

400

600

800

1 000

1 200

300 series 200 series 400 series

China

ChinaChina

RoW

RoWRoW

2016 incremental production by grade, in kt2016 incremental production by grade, in kt

+4.7%

+1.3%+0.8%

TOTAL PRIMARY NICKEL DEMAND


14

� Following a rebound in end-use applications, we expect primary nickel demand to rise by 5% yoy with a +3% variationin H1 and +7% in H2 vs. 2015, to reach a record high of 1,995 kt.

� Most countries will experience a sustained primary nickel consumption growth in 2016 with Indonesia contributing by24% to the total growth.

Real demand for primary nickel, in thousand tonnesReal demand for primary nickel, in thousand tonnes

+94

+14 1 995

20162015

1 901

2014

1 886

2013

1 773

2012

1 674

2011

1 578

2010

1 480

83104

80

1939

22

13

-5

33

-4

33

2012 2013 2014 2015 2016

China Indonesia Rest of World

Incremental consumptionyear-on-year, in thousand tonnes

Incremental consumptionyear-on-year, in thousand tonnes

NICKEL SUPPLY


15

� We are more conservative regarding nickel supply decline in 2016 following the recent rebound of NPI production inChina and higher estimates of new NPI capacity in Indonesia (+58 kt vs. 2015).

� World primary nickel supply shall therefore recede by 2.1% this year vs. 4.1% in our latest forecast provided there areno further production curtailments caused by sustainably depressed nickel prices.

1 434

1 608

1 764

1 950 1 990 1 962 1 921

0

200

400

600

800

1 000

1 200

1 400

1 600

1 800

2 000

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Traditional production NPI China

NPI Indonesia New projects

Primary nickel supply, in ktPrimary nickel supply, in kt Increase in primary nickel supply, in ktIncrease in primary nickel supply, in kt

120

174 156

185

40

-28 -41

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Traditional production NPI China

NPI Indonesia New projects

(Jinchuan’s production has been revised from 2013 onwards)

-46

30

90

176

104

61

-74

2010 2011 2012 2013 2014 2015 2016

Real nickel balance, in thousand tonnesReal nickel balance, in thousand tonnes

MARKET BALANCE IN 2016

CHINA NICKEL CONFERENCE, MAY 24-25TH, SHANGHAI, CHINA16

� Our latest estimates show a market deficit exceeding -70 kt this year. Our assumption only takes into account official

production curtailments.

� Global nickel inventories (excluding nickel ore stocks in China) shall fall to 25 weeks of consumption by the end of the

year.

8,6 8,910,2

14,3

18,5

20,3

17,020,9 21,0

21,6

25,3

28,129,0

25,3

6

11

16

21

26

31

2010 2011 2012 2013 2014 2015 2016

Stocks LME + SHFE + Ni producers

Total stocks incl. distributors + end-users

Nickel stocks (LME + SHFE + Ni producers + distributors + end-users stocks) in weeks of real consumption

Nickel stocks (LME + SHFE + Ni producers + distributors + end-users stocks) in weeks of real consumption

≈+460 kt

4. NPI UPDATE

CHINESE NPI PRODUCTION UPDATE


18

� Chinese NPI production has rebounded to 29 kt in March and 32 kt in April, fueled by higher NPI selling price andnickel ore maintained at low buying price.

� In April, RKEF output represented 66% of the total NPI production, of which three producers accounted for 75% of theNPI RKEF production in China.

� March and April nickel ore consumptions respectively grew by 23% and 45% compared to January.

Nickel ore used in MG + HG NPI production, in wmtNickel ore used in MG + HG NPI production, in wmt

0

10

20

30

40

50

2014

Jan

Mar

May Ju

l

Sep

Nov

2015

Jan

Mar

May Ju

l

Sep

Nov

2016

Jan

Mar

Monthly NPI production in China, in thousand tonnesMonthly NPI production in China, in thousand tonnes

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar

2014 2015 2016

Indo HG usage Phil HG usage Phil MG usage NC MG usage

NICKEL ORE IMPORTS IN CHINA

19

� Despite a recovery of Chinese NPI production in March and April, Q1 2016 total nickel ore imports have receded byrespectively 20% and 77% over the same periods in 2015 and 2014. A tightness on nickel ore availability shouldtherefore materialize in the short time if imports do not seriously rebound as major NPI producers have beendestocking massively.

� Nickel ore prices are expected to pick up following a tighter availability of ore.

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

Jan2014

Apr Jul Oct Jan2015

Apr Jul Oct Jan2016

Apr

Indonesian ore - MtPhilippines ore - Mt

0

20

40

60

80

100

120

Jan-

13M

ar-1

3M

ay-1

3Ju

l-13

Sep

-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14

Sep

-14

Nov

-14

Jan-

15M

ar-1

5M

ay-1

5Ju

l-15

Sep

-15

Nov

-15

Jan-

16M

ar-1

6W

eek

14W

eek

16W

eek

18

Ni ore 1.5% FOB priceNi ore 1.8% FOB price

FOB price for 1.5% and 1.8% nickel ore in USD/wmtFOB price for 1.5% and 1.8% nickel ore in USD/wmtNickel ore imports into China, in million wet metric tonnesNickel ore imports into China, in million wet metric tonnes


INDONESIAN NPI DEVELOPMENTS


20

8 11

14

64

5

10

20142013

+23

27

85

+58

4 4

2015 2016

Other projects

Tsingshan

PT Indoferro

Estimated Indonesian NPI production in ktEstimated Indonesian NPI production in kt

� Our latest estimates show a total Indonesian NPIoutput of 85 kt in 2016.

� PT Indoferro extension project in Cilegon shouldbe ready by Q3 2016 with 3 additional months oframp-up. Total capacity of about 20 kt Ni.

� Tsingshan / PT Sulawesi second phase(additional capacity of 60 kt Ni on first phasecapacity of 30 kt Ni) is operational since March2016.

� Other projects:

� FBLN project: the first two stages(respectively 10 and 2.16 kt) are already inoperation and the third stage of 4.32 kt isplanned to commission in December 2016.

� PT Central Omega Resources targets a 300kt NPI production (27 kt Ni) in three stages withthe construction of the plant and its start-up in2016 (first stage to reach 9 kt Ni).

5. THE INVENTORY PICTURE

TOTAL NICKEL INVENTORIES


22

0

200

400

600

800

1 000

1 200

1

04

2 3 4 1

05

2 3 4 1

06

2 3 4 1

07

2 3 4 1

08

2 3 4 1

09

2 3 4 1

10

2 3 4 1

11

2 3 4 1

12

2 3 4 1

13

2 3 4 1

14

2 3 4 1

15

2 3 4 1

16

2 3 4

Producer nickel stocks Distr./end-users ex-China Distr./end-users in China LME nickel stocks SHFE nickel stocks

Nickel inventories in ktNickel inventories in kt

kt

� Global nickel inventories (excluding nickel ore stocks in China) currently stand at 1 050 kt equivalent today to 28 weeks of

consumption (down 1 week from the peak of 29 weeks in Q4 2015). Our year-end estimate is at 25 weeks.

� At the time of writing, the overstock is therefore estimated to about 300 kt (8 weeks of consumption) and should go down to

about 230 kt at the end of the year (without additional supply cuts).

GLOBAL PICTURE OF CHINESE INVENTORIES


23

0

50

100

150

200

250

300

350

400

1

12

2 3 4 1

13

2 3 4 1

14

2 3 4 1

15

2 3 4 1

16

2

China Nickel producer inventories Bonded warehouses Others incl. NPI SHFE

Inventories evolution in China in ktInventories evolution in China in kt

kt

� Following the Qingdao scandal in Q3 2014, Bonded warehouse inventories moved out of China.

� With the opening of SHFE warehouses early 2015, global inventories of primary nickel in China came back to their pre-

Qingdao level in Q2 2016 and are still expected to grow along the year in the SHFE (expected to exceed 120kt at the end of

2016).

NICKEL ORE INVENTORIES IN CHINA


24

� Indonesian and Filipino HG nickel ore stocks are almost depleted (estimated at 12 kt by end April).

� In nickel content, we estimate current inventories to be slightly above 100 kt-Ni, which is a low level.

� Global nickel ore stocks are expected to slightly rise from June onwards reflecting higher shipments from thePhilippines during the dry season, however lower than in 2015.

� In the next 6 months, China will need to imports quantities able to cover for about 9 months of production due to therainy season starting in October.

0

50

100

150

200

250

300

Jan

Fe

b

Ma

r

Ap

r

Ma

y

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Jan

Fe

b

Ma

r

Ap

r

Ma

y

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Jan

Fe

b

Ma

r

Ap

r

Ma

y

Jun

Jul

Au

g

Se

p

Oct

No

v

De

c

Jan

Fe

b

Ma

r

Ap

r

2013 2014 2015 2016

kT

-Ni i

n o

re a

fte

r y

ield

(N

PI

/ A

PL)

Phil LG Phil MG Phil HG Indo HG

Variation of all (LG + MG + HG) usable nickel ore inventories (all-in), in kT-NiVariation of all (LG + MG + HG) usable nickel ore inventories (all-in), in kT-Ni

6. SHORT SUPPLY OF NON-LME NICKEL UNITS

STAINLESS STEEL SCRAPS SHORT SUPPLY


26

10.7

Q3

10.5

Q2

11.1

10.3

10.2

Q2

10.8

10.1

Q1

10.2

Q3Q4

10.010.1

Q4Q3 Q4

10.3

Q2 Q1

10.8

Q1

2014: 41.4 Mt+9.5%

2015: 41.2 Mt-0.4%

2016F: 42.5 Mt+3.1%

World quarterly stainless steel production, in MtWorld quarterly stainless steel production, in Mt Scrap ratio by area in %Scrap ratio by area in %

� Scraps dealers report a low generation of scraps for the past year which has resulted in a tighter availability of scraps

and an improved pricing (from 75-80% to 90% of the LME).

� We anticipate the scrap ratio to withdraw from 40.1% in 2015 to 38.6% in 2016.

42,0% 41,9% 39,6% 39,0% 39,7% 40,1% 38,6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015 2016

World China

USA Europe

LME NICKEL GRADES TO FILL THE GAP


27

828 847 849

471 415 427

345 369 371

162 167 126

279 314 430

2085 21122202

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

2014 2015 2016

STS Scrap NPI (China + Indo)Feni Non-LME Ni (Brix, Utility, Sinter…)

� Our conservative estimate of a 1,5pt drop in STS scrap ratio worldwide, translates into a 30Nikt increase of

consumption for primary nickel.

� The limited availability of non-LME nickel products in 2016 vs. 2015 will require STS mills to buy more LME nickel

grade (+116kt vs. 2015).

� This explains the current tension on non-LME products and the sharp increase of premiums.

KEY TAKEAWAYS


28

� The huge nickel inventories on the LME and SHFE continue to weigh

negatively on the nickel price.

� Short-term upside on the primary nickel demand not yet supporting

higher prices.

� Non-LME primary nickel units are the clear winners of H1 2016 and

should continue to benefit from increasing premium levels in H2.

� The market has now turned into deficit but the road to recovery for

nickel prices could be bumpy.

Date post:	08-Feb-2017
Category:	Business
Upload:	informa-australia
View:	518 times
Download:	3 times

Jerome Baudelet - Eramet Nickel France - Nickel Market: An insider view from a producer

Business