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oPInIon

China’s reopening still raw

hina is ready to move on from the coro- country has ordered all mines and furnaces restrictions on movement squeezed flows of
Cnavirus and get back to business as closed from March 26 with the result that lo- raw material.
usual. cal producers Samancor, Tharisa and Glen- With several Chinese smelters also NEW DATES ANNOUNCED SOON
“With the spread of COVID-19 under con- core-Merafe Chrome have declared force locked down over the peak of the coronavi-
trol, we should actively carry out the resump- majeure on deliveries. rus outbreak in China, the country’s shortfall
tion of work and production,” President Xi Cobalt supply is dominated by the Demo- has translated into accelerated imports of
Jinping said in early April. cratic Republic of Congo, where producers refined tin metal.
Xi’s comments, reported by state media are proactively reducing output and shipping China imported 1,660t of tin in January-
under the headline “Chinese president un- routes via South Africa risk being disrupted February, compared with 3,000t and 2,500t
pauses China’s economy”, were made dur- by port closures. for the whole of 2019 and 2018 respectively.
ing a tour of Zhejiang province. The effects of such country-by-country It flipped to being a net refined tin importer
As ever, Xi’s whistle-stop tour was an ex- lockdowns are most acute on those raw ma- for the first time since 2017.
ercise in subliminal messaging. Those com- terial supply chains that were already under It may be a template for how raw materi-
ments were made during a visit to an auto pressure, such as nickel. als’ disruption translates into higher imports
parts supplier in the Daqi industrial park in Indonesia, which has historically been a of refined metal, upending a long-running
the city of Ningbo. key supplier of nickel ore to China’s nickel pig trend of increased Chinese self-sufficiency
He also dropped in on Ningbo Zhoushan iron (NPI) producers, has this year banned at the metal stage of the production value
port, one of the world’s busiest, and praised all unprocessed ore exports. chain.
it for getting throughput back to pre-corona- The market was looking to the Philippines However, that assumes that flows of re-
virus levels. to pick up some of the slack, but that coun- fined metal aren’t subject to the same levels Hon. Bill Johnston MLA
The political messaging, however, masks try has just suspended mining operations in of lockdown and shipping problems that are Minister for Mines and Petroleum
the fragility of China’s metals raw material the southern province of Surigao del Norte, already stressing raw materials chains. Government of Western Australia
supply chains. home to most of the country’s nickel mines. China’s increased draw on refined tin from
As the coronavirus spreads, so too do the It has also stopped the entry of foreign ves- the international market hasn’t done any-
lockdowns on activity in key supplier coun- sels to the province, risking a full cut-off of thing to help tin prices.
tries such as Chile, Peru, South Africa and shipments. London Metal Exchange tin sank to a
Indonesia. China’s nickel ore imports were already decade-low of $US12,700/t in March and is
China has rapidly built out its metals refin- down by 5% in the first two months of this currently trading at $US14,550/t, still the low-
ing capacity over the last decade but at the year due to the combination of the Indone- est price level since the base metals cyclical
cost of needing ever more imported raw ma- sian ban and the seasonal drop in Filipino trough on 2016.
terials to feed its smelters. production over the rainy season. That’s because all the base metals mar-
Some of those supply chains are now Unless either country reverses its policy kets are more focused right now on the col-
starting to creak. decisions, imports of ore are going to fall lapse in global demand, both at the first-use
The metallic spectrum of China’s raw much harder. fabricator and the end-use consumer stage.
materials imports is highly differentiated, Some compensation may come from ac- Supply disruptions due to mining lock-
depending on the origin and number of sup- celerated flows of Indonesian NPI direct to downs and logistics bottlenecks are still play-
plier countries. China’s stainless steel producers. China’s ing catch-up with the demand shock rippling
Ongoing emergency lockdowns in Chile ferronickel imports, a customs code that in- around the world.
and Peru, for example, place at risk flows of cludes NPI, jumped by 60% year-on-year in Moreover, Chinese importers are proba-
copper, zinc and lead concentrates. January-February. bly carrying sufficient supplies of raw materi-
Chile and Peru accounted for 55% of But the market was already sceptical that als to ensure production over the short term.
China’s inbound cargoes of copper concen- Indonesian NPI could fill the ore gap and But the longer lockdowns go on, and there
trate in 2017, the last year China’s customs continued exports are dependent on wheth- are plenty of indications that they will be ex-
department published a full breakdown of er Indonesia can maintain mining operations tended for as long as it takes to control the
metal imports. as it rolls out increasingly draconian anti- spread of the virus, the greater the potential
The two countries are also major suppli- virus restrictions on movement. for supply chain disruption.
ers of zinc concentrate, but so too is Aus- Tin is another metal with a stressed Chi- As the biggest buyer of metallic raw mate-
tralia, where mining operations have so far nese supply chain. rials, this is a ticking time-bomb for China’s
been less affected. The country’s smelters rely on imports metals producers.
The pressure on supply chains is accen- of tin concentrates from Myanmar, where President Xi may be keen to stress that
tuated in metals such as chrome, where production has been steadily declining over China is open for business as usual, but it’s
production is concentrated in one particular recent years as tin miners exhaust easily- far from being business as usual for miners
country. exploited resources. around the world.
South Africa last year accounted for 83% China’s imports of tin concentrates fell by The pressure on the country’s raw materi-
of China’s imports of chrome ore, a core 20% last year and were down another 29% als supply chains is only going to get worse.
input for stainless steel producers. The in January-February as border controls and
– Andy Home, Reuters

Page 14 MaY 2020 aUSTRaLIa’S PaYDIRT