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Indoferro Nickel Pig Iron Becomes a Threat To The Brazilian Market.

Posted Tuesday, May 24th 2013

Translated from the original article by Olivia Alonso | De São Paulo


The increased production of nickel pig iron (NPI, its acronym in English), a cheaper substitute for nickel, already caught the attention of Brazilian mining. Created in China, "nickel pig iron", as it is known both abroad and in Brazil, its volume had doubled since 2010.

The product has become a form of control over market prices for nickel steel manufacturers in China. And has been causing concern to those mining iron-nickel, like Votorantim Metais, Vale and Anglo American, who have already expressed their alertness to that competitor.

Vale, the second largest global producer of nickel, cites a report that growth in nickel pig iron among the risk factors for the price of the metal. "The increased availability of alternative nickel sources or substitution of nickel pig iron for nickel by the end-use applications may adversely affect the company's nickel business," said the miner. The company lists as competitors, scrap, nickel pig iron and other nickel producers.

Anglo American acknowledges that the supply of nickel pig iron influences the market, since it is a cheaper option. However, the company said through its press office that "the product is different, with lower nickel content and does not have the same quality of ferro-nickel and nickel class 1."

Although it was created five decades ago, the nickel pig iron began to be produced on a large scale only since 2005. Made from low-grade ore nickel laterite, mixed with coke and mineral aggregates, the product has low concentration of nickel in its composition, usually between 1.5% and 15%. Meanwhile, the iron-nickel alloys used by industry have a content of at least 30%.

With this concentration (1.5% - 15%) nickel pig iron can replace the nickel-iron alloys in the manufacture of stainless steel and some alloy steels. However, it is not used for some specific purposes, such as batteries, alloys and chemical applications for the nuclear, aerospace and electronics, for example."

The production of nickel pig iron went from virtually zero in 2005 to 150 tons in 2010 to nearly 300,000 tons last year," said Tito Martins, President of Votorantim Metais. For this year, the nickel analyst at Bank of America Merrill Lynch (BofA), Michael Widmer, an estimated 330,000 tonnes.

The jump in recent years has been driven by the high price of nickel, which has exceeded U.S. $ 50,000 per tonne on the London Metal Exchange (LME) in May 2007. At the time, the cost of nickel pig iron was around $ 17 per ton, which made for an advantageous substitution.

In recent years, the price of nickel fell sharply - is now trading around $ 15 per ton - but the production of nickel pig iron was also cheaper. According to Widmer, depending on the type of furnace/smelter, the cost today could be around $ 10 per ton.

The reduction of costs, it was possible for both producers using blast furnaces as well as those that use electric furnaces, is pointed out by analysts at investment bank RBC Capital Markets as one of the key drivers behind the rush of nickel pig iron in the last years.

Currently, nickel pig iron is produced on a large scale only in China and consumed in the country itself. However, it soon will be sold by Indonesia. The company Indoferro invested $ 300 million in a hot-air blast furnace for making nickel pig iron and began producing their first full scale production in April this year. According to Stephen Flowerdew, manager at the company, the production is 250 thousand tons per year, with 10,000 tonnes of nickel, in principle, with concentrations varying between 2% and 4.5%.

Flowerdew told Valor that the firm will sell nickel pig iron to customers in Taiwan, India, Europe and South Africa "We are very excited to include South America and North America in our base," he said, emphasizing that Brazil is a market where the company intends to operate.

Regarding Chinese rivals, Indoferro claims to have the advantage of raw material in abundance, especially now that the Indonesian government is limiting exports of mineral resources. Today, Chinese companies import most of lateritic nickel ores from just Indonesia and the Philippines.

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