Macquarie Research, Chinese nickel pig iron on the rise

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Commodities Comment
Chinese nickel pig iron on the rise
Feature article
 Chinese imports of nickel ore are surprisingly high, suggesting very high
nickel pig iron production.
Latest news
 Copper and zinc fell by 1.3% and 1.9%, respectively, in Monday’s LME
trading after oil prices rose again and Middle East uncertainty drove risk
aversion. Platts has reported that Anglo American has settled 2Q PCI coal
prices for its Foxleigh brand with a South Korean steelmaker at $275/t fob
Australia, equal to 83.3% of the hard coking settlement. This is an all-time
high and is $95/t above the first-quarter price.

 The latest data release from worldsteel shows that February's global steel
output equated to 1.52btpa, up 8.8% YoY and a new all-time record. China's
708mtpa was a big part of this, but the biggest contributor to the 1.6% MoM
rise was a 7.2% pickup in Europe back to the 200mtpa level seen in 2Q 2010.
Japan also posted its highest monthly total since 2008 at 116mtpa.
 The figures for blast furnace output were even more positive: 1.1btpa was
exceeded for the first time in the month, beating last April's record, while YoY
growth is showing signs of reaccelerating, up to 8.1% YoY from 7.2% in
January. Ex-China is now back 3% above 2Q 2010 levels, while China's
658mtpa keeps its total production share at ~59%. As a result, there are
positive knock-on effects on the raw material markets, with production at met
coal importers up 10% YoY and iron ore up 9.8%.
 US and Canadian demand for aluminium products, as measured by
shipments from domestic producers plus net imports, increased by 13% YoY
in 2010, according to the Aluminium Association. Net new orders of aluminium
mill products increased by 18% YoY in Jan/Feb 2011. US aluminium
premiums continue to rise, supported by warehousing-financing deals, and
are now reported at upwards of 6.5¢/lb delivered in the US Midwest.
 Chinese coal imports fell sharply in February, shared between thermal (to
59mtpa from 126mtpa in January) and met coal (to 21mtpa from 53mtpa).
This is unsurprising for met coal given the severe supply disruptions in
Australia. Mongolian imports were also very weak. Over the past two
months, seaborne met coal imports have averaged ~37mtpa, which is still
strong relative to ~33mt for 2010.
 Chinese met coal exports to Japan, at 7mtpa, were the highest since early
2008, while thermal coal exports were flat. The increase in Chinese exports
of met coal is likely to be supportive of, rather than detrimental to, met coal
pricing, given the equivalent CIF Japan price of hard coking coal from Shanxi
is around ~$350/t.
 A ship carrying 8,300t of ferronickel (around 1,700t contained nickel) from
Indonesia has been hijacked by Somalian pirates, according to Reuters. This
is clearly material to PT Aneka Tambang (around 8.5% of its annual
production), but immaterial to the nickel market.