– EMEA and Asia (ex China) copper & nickel dispersion indices remain weak –
– Increasing number of China copper smelters back online –
– N & S America Copper Dispersion Indices record averages of 53.8 and 51.8 –
– China NPI Dispersion Index rebounded strongly to 47.1 from 37.9 in April –
May 2023 Copper observations include:
The Global Dispersion Index rose to 46.2 from 44.0 in April, the first month-on-month rise this year. While the Global Inactive Capacity Index also rose on average for May, this masks a significant differentiation between the two halves of the month. After recording the highest reading in almost five years on May 6th at 25.6%, the Global Inactive Capacity Index quickly fell back to finish the month at only 14.3%. This was largely driven by changes in smelting activity in China, where the country-level Inactive Capacity Index fell back from 17.4% on May 8th to 9.3% on May 31st. Despite this, it is interesting to note that Daye’s 300kt/a smelter in Hubei province remains on an extended outage, while Zhongtiaoshan’s 50kt/a Shanxi smelter and Zijin Mining’s 150kt/a Qiqihar plant in Heilongjiang province were also seen offline at the end of the month. In contrast, Jiangxi Copper’s massive 900kt/a Guixi smelter in Jiangxi province saw smelting intensity ramp up over the month, helping to explain how both the Dispersion and Inactive Capacity Indices could rise simultaneously. Indeed the China Dispersion Index rose by 10.6 points from only 42.1 in April – its lowest reading since March 2018.
While China rebounded, weakness remained globally, with the the ex. China Dispersion Index falling by 3.3 points to 41.9, the lowest reading in over two years. Kazzinc’s 70kt/a Ust-Kamenogorsk smelter in Kazakhstan was observed inactive for the whole of the month, as was Rio Tinto’s 320kt/a Garfield smelter in Utah. Incidentally, the closure of Codelco’s 120kt/a Las Ventanas smelter at the end of May will see this operation now fall out of the South American Index.
- Global Dispersion Index rose to 46.2 in May from 44.0 in April, the first month-on-month rise this year
- This was despite Global Inactive Capacity rising by 4.1% to an average 17.4% for the month. A Global Inactive Capacity reading of 25.6% on May 6th – indicating that more than a quarter of observed total smelting capacity was inactive that day – was the highest single-day figure since July 2018
- Since then, smelting activity in China has seen an appreciable recovery, with the country-level Dispersion Index rising by 10.6 points to an average of 52.7 in May. This follows a reading of only 42.1 in April – the lowest in five years
- Of the other regions, only North and South America saw Dispersion Indices above the average of 50, recording averages of 53.8 and 51.8, respectively
May 2023 Nickel observations include:
The Global Dispersion Index fell back to 41.8 in May from 43.3 in April, despite a strong uptick in activity in China, where the country-level Dispersion Index rose to 47.1 from 37.9 the previous month. This was primarily driven by the largest smelters in Shandong, namely Jiangsu Delong’s 100kt/a and Shandong Xinhai’s 190kt/a, and despite half a dozen smelters in the north of the country being observed offline at the end of the month, believed to be suffering from poor margins due to falling NPI prices since the beginning of the year.
Outside of China, ferronickel operations continue to struggle due to increased competition from NPI and high electricity costs in Europe. Of the southern European operations, only Euronickel Industries’ 20kt/a plant in North Macedonia appears to have restarted following closures brought on by the war in Ukraine last summer.
- Global Dispersion Index fell to 41.8 in May, down from 43.3 in April and the 6th consecutive monthly fall
- The China NPI Dispersion Index rebounded strongly to 47.1 from 37.9 in April, although it has now recorded its fourth month this year below the average of 50
- Only the Americas Dispersion Index is above 50, recording an average of 50.8 for May. Europe & Africa remains the weakest region, with a Dispersion Index of only 34.1
- The ferronickel Dispersion Index fell back to 47.7 in May from 51.9 in April, which was its only reading since March 2021 above the average of 50
Dr Guy Wolf, Marex Global Head of Analytics, commented: “The rebound in copper and nickel smelting activity in China is noteworthy against the bearish macro environment that has seen rumours emerge of an impending stimulus package from the government. Indeed, copper demand will need to step up to meet supply as SAVANT data shows rising concentrate exports from South America are now being processed to metal. Together with increasing refined shipments from Africa, the supply side is starting to fire.”
China Activity Dispersion Index (7 day moving average), March 2023 – Present
Ferronickel Activity Dispersion Index (7 day moving average), December 2022 – Present
Source: SAVANT by Earth-i
The Activity Dispersion Index is a measure of capacity-weighted activity levels observed at smelter sites where a reading of 50 indicates that current activity levels are at average levels. Readings above or below 50 indicate greater or lesser activity levels than average, respectively. The above chart displays these readings as a weekly rolling average.
The Inactive Capacity Index is derived from binary observations of a smelter’s operational status as being either active or inactive. The capacity weighted global and regional indices show the percentage of smelter capacity that is inactive, with readings displayed in the chart below as a weekly rolling average. A reading of zero would indicate 100% smelting capacity.
The SAVANT platform monitors up to 90% of the smelting capacity for copper and nickel round the globe. Using daily updated sources, including extensive use of geospatial data collected from satellites, the index reports on the activities at the world’s smelting plants offering subscribers unprecedented levels of coverage, accuracy and reliability. This dataset allows users to make better informed and more timely trading decisions.
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