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Growth of Chinese SS production to support nickel consumption

By unknow , 2008-06-20 12:00:00

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Interfax China reported that annual growth of China's stainless steel production is expected to linger around the 10% mark from 2008 to 2010, which will provide firm support for the country's nickel consumption.

Mr Philip Sushchikhin a market analyst with Norilsk Nickel said that with the increase of 300 series stainless steel consumption, the 300 series' share of China's total stainless steel production will increase to 60% in 2008 from 2007's 53%.

The 300 series, also known as austenitic steel, contains the highest content of nickel among the different varieties of stainless steel, while other types, such as 200 series and 400 series contain very little or even no nickel content. Production of 300 series stainless steel production dropped from 72% of China's total stainless steel production in 2000 to 53% in 2007, as nickel prices soared rapidly during this period, resulting in increased output of lower nickel content stainless steel.

The analyst said that growth of China's annual nickel consumption will exceed production growth between 2008 and 2012, as long as nickel pig iron production remains stable at 100,000 tonnes of nickel metal content per annum, due to the low nickel price.

It said that nickel pig iron, a low nickel grade ferronickel alloy, emerged in the Chinese market in late 2005 and was widely used by Chinese stainless steel mills in 2006 and 2007 as a substitute of refined nickel due to its comparatively low price. However, nickel consumption growth started slowing down this year as major stainless steel mills were forced to cut production as production costs soared due to prices hikes in raw materials, such as coal and pig iron. This has resulted in China's nickel pig iron producers running into operational difficulties.

Mr Sushchikhin predicted that "After 2009, if there is no technological breakthrough in the process of nickel pig iron production that would lead to the net cost dropping below its current level of USD 25,000 per tonne we can expect the possibility of a complete withdrawal of nickel pig iron from stainless steel production. This will strongly influence nickel market supply, mainly in China, resulting in increased nickel imports to China. If this happens, the global nickel market may see a deficit again in 2010 after a nickel surplus between 2007 and 2009, which will lead to substantial price increases.

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