Western Areas Ltd. has entered into an off-take contract with the Tsingshan Group, through its associated entity Golden Harbour International Pte Ltd., to import raw materials for the production of stainless steel. Tsingshan is China’s largest producer of stainless steel, particularly the high nickel content 300 stainless series and the largest nickel consumer. Annually it accounts for approximately 25% of China’s total annual consumption of nickel.

The three-year contract for 10,000 metric tons per year (mt/y) of nickel contained in concentrate begins in February.

Western Areas Managing Director Dan Lougher said the agreement with Tsingshan was many years in the making and followed from the company’s desire to capture as much value as possible for the nickel in concentrate sold by Western Areas. “Over three years ago, Western Areas recognized Tsingshan as an innovator in the production of stainless steel and since then we have developed a close working relationship through the sharing of technical knowledge and many site visits,” Lougher said.

“Tsingshan is clearly leading the charge in China to produce a greater proportion of the higher quality 300 series stainless steel product, which contains up to four times the amount of nickel than 200 series stainless, Lougher said. “With this in mind, it has been a specific Western Areas strategy to innovatively position itself in the stainless steel supply chain, with the ultimate objective of delivering a stronger bottom line to our shareholders through investigating non-traditional markets and thereby capturing a greater share of the value of the nickel we produce.”

In 2015, Tsingshan produced 5.4 million mt of crude stainless steel and reported revenue of around 87.5 billion RMB. Overall Chinese stainless steel production for 2015 was estimated at 23 million mt.

Western Areas commenced an off-take tender process in late September for approximately 20,000 mt of nickel contained in concentrate per year, which equates to approximately 90% of production. The company’s two existing contracts with BHPB Nickel West and Jinchuan Group are due to expire on January 31.