Covid-19 mining closures hit China’s metals supply chain
From Chile to SA, shortages of key, metal-making raw materials are hurting China’s manufacturing
Beijing — Mines around the world are cutting output due to the coronavirus pandemic, leaving top metals consumer China fretting over supply as it recovers from the initial demand shock that the outbreak inflicted on its economy.
China boosted copper imports year on year in March as it looks to reboot industrial activity across the country, but potential shortages of key, metal-making raw materials create risks to production of everything from home appliances to electric-vehicle batteries.
Below is a list of minerals for which China has a high import dependence.
Key suppliers: Chile and Peru
Last year, China relied on imports for almost 80% of its copper concentrate, based on International Copper Study Group data. The partially processed ore is used to make copper metal, a staple of the power and construction industries.
Exports from top supplier Chile have been largely unaffected despite a coronavirus state of emergency, but in Peru some miners have reduced shipments or even suspended operations altogether.
Chinese smelters are becoming “very nervous” about supplies, says a South American miner, while treatment charges are in free fall, pointing to a tighter market.
Key suppliers: Philippines and New Caledonia
Imports from Indonesia dwarfed China’s domestic output in 2019, but the Southeast Asian country has banned nickel ore exports and inventories at Chinese ports are at their lowest since June 2018, data from research house Antaike show.
The biggest miners of nickel in alternative supplier the Philippines have halted some operations to comply with Covid-19 containment measures.
Tight supply will force producers of stainless steel raw material, nickel pig iron (NPI), in China to “consider cutting output,” says Antaike chief nickel analyst Xu Aidong.
Key suppliers: Guinea, Australia and Indonesia
Bauxite imports accounted for about 40% of China’s 2019 production of alumina, which is used to make aluminium, estimates CRU analyst Wan Ling.
Top supplier Guinea has seen no disruption so far and Australian spot bauxite prices remain low.
“There have been some confirmed cases in the bauxite mines in Guinea and there could be more,” Wan says. “We need to see what the government will do in terms of controlling the coronavirus.”
Key suppliers: Myanmar
China relies on imports for 30%-35% of its tin concentrate, says Cui Lin, the International Tin Association’s chief China representative, with the vast majority coming from neighbouring Myanmar.
Inbound shipments, which fell year on year in January and February, have not been directly affected by coronavirus-related disruptions, but mines in Myanmar are short of Chinese workers willing to cross the border to maintain ore processing operations, says Cui. “We think maybe it will be better from May.”
Large Chinese smelters have enough concentrate in stock to last three to four months, but private producers face a difficult time in April and the first half of next month, Cui says.
Chromium and manganese ore
Key suppliers: SA
China relies heavily for the stainless steel ingredients on SA, which has extended a coronavirus lockdown until end-April but is now allowing mines to produce at up to 50% capacity.
Several SA miners have declared force majeure but China had more than 12.5 weeks of chromium ore stocks as of end-March, according to CRU senior analyst Ellie Wang.
The effect of the SA lockdown at present is “quite limited”, but an extension would likely lead to disruptions, said Concord Resources research director Duncan Hobbs. “It’s very difficult to see how SA supplies in either of those markets could be replaced from other sources.”
Key suppliers: Democratic Republic of the Congo (DRC)
China has a near total reliance on the DRC, the world’s biggest cobalt producer, for cobalt hydroxide used in electric-vehicle batteries.
DRC cobalt exports fell 15% fall in the first-quarter and its mining minister has warned that mine shutdowns due to the pandemic would be “catastrophic”, while shipments could be disrupted if truck drivers taking DRC cobalt to ports are subject to quarantine in Zambia.
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