London 27/11/2015 - A group of leading Chinese nickel producers has agreed to cut nickel output by 15,000 tonnes from next month and no less than 20 percent of total production in 2016 due to low prices, they said.
The cuts are part of a move to tackle low nickel prices, which are below the cash costs of around 70 percent of producers around the world.
On the Shanghai Futures Exchange (SHFE), the most active nickel contract for January delivery ended at 69,370 yuan per tonne, down 600 yuan on Thursday's close.
On the London Metal Exchange (LME), nickel dropped to its lowest since 2003 at $8,145 early this week and was recently at $8,985 per tonne.
"The participating companies believe that they current price environment has deviated from the fundamentals and the industry has entered into a vicious cycle. In the long term, this will jeopardise the whole nickel industry," they said in a statement on Friday.
Jinchuan Group, Jilin Ji'en Nickel Industry and Xinjiang Xinxin Mining Industry will form a joint working group with nickel pig iron (NPI) smelters Jiangsu Delong Nickel Industry, Shandong Xinhai Nickel Industry, Inner Mongonia Xinhualian Nickel Industry, Jiangsu Baotong Nickel industry and Tsingshan Group.
Much in the same way as the Chinese Smelters Purchase Team (CSPT) operates in copper, they will work en bloc, passing information more freely among themselves to ensure a stronger domestic nickel sector.
"There will be further releases from each company on the proportion of the cuts," one industry source who participated in the meeting said.
The eight nickel producers account for 70 percent of annual production in China, estimated by an industry source.
The country’s nickel metal output was at around 220,000 tonnes last year, according to Antaike, a state-owned Chinese metals research firm.
"It's hard to tell how much [the cut] could support for the nickel prices but for sure it could keep prices from dropping further," Beijing Antaike nickel analyst Fan Runze said.
China's total electrolytic nickel production this year will probably be less than last year at around 190,000-200,000 tonnes, Fan said. He expects NPI output this year to fall to around 380,000 tonnes (contained nickel) this year from 470,000 tonnes last year.
Jinchuan, the world's fourth-largest nickel producer and its second-largest cobalt producer, will target output of around 156,000 tonnes of nickel this year, down from 160,000 tonnes last year.
(Additional reporting by Vivian Teo, editing by Mark Shaw)