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| Fe-Ni Production In South Korea By Posco Is A Shocking Matter |
| = A Joint Venture With SMSP, To Produce 30,000 Tons / Year Of Ni-Content, To Start Its Operation 2 Years Later |
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Posco of South Korea announced on the end of last week that the Company will establish a joint venture company with SMSP, a leading nickel mine in New Caledonia, to produce ferro-nickel in South Korea . This is the first case that a stainless steel mill launches to produce ferro-nickel. This project has planned to produce ferro-nickel on a scale of 30,000 tons per annum of nickel in ferro-nickel and a joint venture company is scheduled to be established in February of 2006. Also, this project has targeted to start the production after 2 years since the inauguration of a joint venture. Its feasibility study will be proceeded in due course of time. A nickel refinery is constructed in South Korea and nickel ore, as raw material for production of ferro-nickel, is supplied by SMSP in New Caledonia. A period to be valid for this joint venture is 30 years and a ratio of the capital consists of 51% by SMSP and 49% by Posco. Posco will invest US$352 million in this project. According to a survey by a leading ferro-chrome producer, a weight of nickel to be shared in the cost for production of stainless steel is estimated at 47% in total, consisting of <> 27% of nickel ( nickel metal and ferro-nickel ) and <> 20% of nickel-based stainless steel scrap. For a reference, a weight of chrome to be shared in the production cost is estimated at 7 - 8% in total of ferro-chrome and chrome-based scrap. Therefore, a weight of raw materials, including nickel and chrome, to be shared in the cost to produce stainless steel will come to 63.6% in total. A remaining 36.4% has to cover the expenditure of such production processes as melting, rolling and so on and the charges for sales and operation at headquarters. The subject to have a competition power for production of stainless steel depends on how to purchase raw materials at lowered prices with stable supplies, because prices of raw materials share nearly 2/3 of the costs. Needless to say, major stainless steel mills in the world have already known about this situation but, in view of the matters that the project to develop nickel sources requires a huge amount of money and specialized nickel producers have been proceeding by themselves nickel projects in expectation of an expansion of the demand for nickel, stainless steel mills to invest in nickel sources were so far rare. In Japan, Nisshin Steel has invested in June of 1991 a 10% of the capital in SLN, a subsidiary of Eramet in France, and has been receiving ferro-nickel on a stable pace for a long period from SLN. Nippon Steel established Sumitomo Hyuga Refining Company as a joint venture with Sumitomo Metal Mining and also has acquired the shares of Pacific Metals in order to receive ferro-nickel on a stable pace. Only Nisshin Steel has participated directly in the capital of nickel mine. Posco of South Korea produced more than 2.20 million tons of crude stainless steel in 2005 and is also scheduled to operate a stainless steel plant ( to produce 800,000 tons per annum ) of Zhangjiagang Pohang Stainless Steel Company established by Posco as a joint venture with Chinese enterprise from August of 2006. Posco purchases nickel mainly on long term contracts and, according to the statistics released in South Korea, this country is supposed to have imported 31,000 tons of nickel in ferro-nickel in the full year of 2005 ( estimated on the basis of the actual quantity imported in January - November of 2005 ). The quantities of nickel in ferro-nickel imported from main sources into South Korea in 2005 are estimated as follow ; <> from Japan : 11,200 tons, <> Domininca : 4,530 tons , <> from Colombia : 6,070 tons, <> from Indonesia : 1,700 tons and <> from New Caledonia : 7,250 tons. As regards raw materials to be required by Zhangjiagang Pohang Stainless Steel for production of stainless steel, the headquarters of Posco will purchase nickel units on behalf of this joint venture company and, therefore, the demand for nickel from Posco is in the direction to increase further. SMSP has achieved to cooperate with a stainless steel mill in Far Eastern region on nickel, which is the earnest wish for SMSP. Initially, SMSP aimed to cooperate with a stainless steel mills in Japan on nickel but an idea ( nickel conversion on consignment base ) as proposed to Japanese side 3 years ago was not successful. Also, in advance of this proposal, SMSP proposed in October - December quarter of 2000 Pacific Metals to establish a joint venture company with SMSP, which will consolidate nickel deposit held by SMSP with smelting and refining division of Pacific Metals in order to produce ferro-nickel on a consistent process, but this plan was also unable to succeed. In consequence of that the worldwide swell of the demand for natural resources has surged from 2004, the prices in 2005 had risen steeply to US$60 per barrel for oil, US$6.69 per lb. ( on the average in 2005 ) for nickel and US$1.66 per lb. ( on the average in 2005 ) for copper as the extraordinarily higher levels. In view of the present situation, which the matter to develop nickel resources needs a huge amount of investment and nickel producers have suffered from the difficulties to secure new consumers of nickel, it is natural on a theoretical base to cooperate with a nickel supplier in New Caledonia, where has possessed the distinguished nickel resources in the world, but a stainless steel mills to invest directly in the nickel project is supposed to face many walls, because it is important for a mill to invest money in the facilities to increase stainless steel products and the reality is unable to finance for investment in developments of raw materials, which will exhibit an overwhelming power to compete on costs. Nickel price is settled on the basis of LME nickel price and, accordingly, a tendency to uniform the costs for raw materials at stainless steel mills in the world was so far strong. An advantage of the technologies to produce stainless steel was respected The countermeasure taken this time by Posco to produce ferro-nickel by themselves is an idea, breaking away from the conventional common sense. This case will put a shock on the stainless steel industry. In the course of that the capacity to produce stainless steel in China is anticipated to expand to 3.60 million tons per annum in 2006 and more than 4.00 million tons per annum in 2007, the competitions on cost-wise are supposed to become harder hereafter. Under the circumstances, an advantage of the countermeasures for raw materials, sharing 63.5% of its production costs, seems to become an important factor to survive. In particular, raw materials concerned with nickel, including its scrap, have shared 47% of the cost and, consequently, it is natural that an importance of nickel is put on a close-up. Posco has taken a large risk by the capital investment in nickel of New Caledonia instead of a single process to purchase nickel ore and refine it but, on the other hand, is expected to obtain a substantial earning from this project. Generally, many of the parties concerned have a view that the cost to produce nickel metal will be US$10,000 per ton ( US$4.53 per lb. ). At present, according to a forecast by the analyst ( Stainly Morgan ), LME nickel price will be US$6.50 per lb. in 2006 and US$7.00 per lb. in 2007. Therefore, a firm tone of nickel price is anticipated to continue for the future. |
| last modified : Thu 19 Jan, 2006 [11:24] |
