Xstrata held a seminar for investors last week covering all its divisions (nickel, chrome, coal, zinc, copper and iron ore) to report a summary of the operations as well as a growth prospect of each division. With regard to the nickel division, the company commented that its ferronickel production would reach 92,000 tonnes annually by 2017, based on the planned increase in output at Koniambo Phase One which is to complete in the second half of 2012, and at Falcondo with its rehabilitation plan. Outline of Xstrata's summary of 2011's nickel operations and its growth prospect is as follows:
World supply and demand of nickel in 2011
LME nickel price in 2011 ranged widely between the highest at USD 29,030 per tonne in February 2012 and the lowest at USD 16,936 per tonne in November 2011. In the first half, production troubles caused short supply situation, while in the latter half, there was an over supply situation. On full year basis, the oversupply in the second half covered the short supply in the first half to make the year's supply meet the demand. This can be explained by the decrease of LME stocks during the year, i.e. 138,000 tonnes in January decreased to 91,000 tonnes in December 2011.
Stainless steel production consumes as much as 65% of worldwide demand of nickel. Production of crude stainless steel in the year of 2011 is forecasted to reach its historically the highest level, meaning overall demand for nickel in the year will amount to 1.6 million tonnes, also the highest record, up by 35% from 2009. Consumption of nickel by the stainless steel industry only is forecasted to reach 1.0 million tons for the first time. This means that about 57% of primary nickel production is to be consumed by the industry.
Production of stainless steel is forecasted to grow also in 2012, but it is not certain whether it will as expected due to the financial monetary crises in Europe and other unknown factors.
Nickel Pig Iron (NPI) production in China
As mentioned above, there were production troubles earlier this year. In addition, some of the Greenfield and Brownfield plans of which start-up was scheduled during 2011 were delayed over to 2012. It was the increased production of NPI in China that actually supplemented the shortage of supplies.
NPI production in China is estimated 240,000 tons in 2011, largely up from 160,000 tons in 2010, mainly because of the high nickel price and good demand in the first half. On the other hand in the second half NPI production dropped due to the low nickel price and power supply restrictions. This is why those producing NPI are regarded as swing producers whose production is unstable.
Such swinging attitudes of the NPI producers will be basically unchanged in 2012 and serve as a kind of "valve" in supply of nickel, but it is important to remember that NPI production has weakness of high costs and unstable supply of raw materials on log-term basis, constituting a risk factor on the supply side.
Xstrata's summary of its operations projects
Production summary of 2011 as follows, total nickel production up by 14% in the first three quarters of 2011, mined production at INO (Integrated Nickel Operations) up by 5% of nickel in the ore despite lower grade ore output, Nikkelverk refined nickel production reached 92,000 tonnes on annual basis despite the roaster trouble, cash costs at INO were lowered to USD 2.14 per pound in the first half, down by 25% from the same period of 2010, and down by 54% from 2008, development at Kikialik in Raglan is on budget and ahead of schedule, Falcondo resumed operation successfully and production during the three quarters was up by 6% on higher operational rates than planned and Koniambo is to start up in the second half of 2012.
Summary of major projects as follows, the Greenfield project in New Caledonia, Koniambo Phase One (annual production of 60,000 tons of nickel in ferronickel) is to complete start up in the second half of 2012; smelting is by the Pyromet method; status of construction: 90% on belt-conveyors from the mine to the smelter, 73% on the concentrators, 60% on the coal plant and 56% on the primary smelting facilities such as the smelting furnace and the kiln, Falcondo, Dominican Republic ferronickel operation, restarted earlier than scheduled is now run at its 50% capacity; production costs when it comes to its full capacity is estimated USD 7 per pound or less, the project of world class operation at Raglan, Quebec, Canada is in progress, where USD 530 million project development of Qakimajurg mine is to complete in 2016 with designed production capacity of 40,000 tonnes per annum of nickel content in high-grade sulfide nickel ores (Ni: 4.4% and 3.9% in the lower zone), which is to be supplied to INO, Nickelverk, Norway; and at Kikialik, the USD 95 million project has already been in operation ahead of schedule with full designed capacity of 7,000 tonnes of nickel content in the ores.
(Sourced from TEX Report Limited)
