China's stainless steel producers, the largest in the world, will buy less nickel this year as demand for their products is weak, an industry official said.
Steelmakers are also making more products with low-nickel content, Li Cheng, executive president of the stainless steel council of China's Special Steel Enterprises Association, said today in Shanghai. The nation's production of the rust-proof metal may rise 10 percent this year to almost 8 million metric tons, outpacing demand of 7 million tons, he said.
Nickel prices have dropped 35 percent this year as steelmakers cut purchases of the raw material. Chinese stainless steel demand has dropped as makers of kitchen utensils relocate to Vietnam or other lower-cost countries, Li said.
''The labor-intensive industry is moving to Vietnam and other countries because of higher labor costs and the yuan appreciation,'' Li told reporters at a conference. ''That is the major issue curbing China's stainless-steel consumption.''
Half to two-thirds of kitchenware makers in China's southern province of Guangdong have closed or cut output, Li said. In the eastern province of Jiangsu, half of the producers have shuttered, he said.
Chinese stainless steel output won't recover in the fourth quarter, Li said. China is the largest consumer of nickel.
High Costs
Chinese stainless steelmakers expanded capacity faster than demand growth, depressing prices even as the costs of materials including iron ore and ferrochrome surged to records. The nation's stainless-steel capacity is one third larger than its output, Li said.
Shanxi Taigang Stainless Steel Co., the largest Chinese maker, produced only about 150,000 tons of the material in July and August and 100,000 tons in June, Li said. The company has the capacity to make 250,000 tons a month.
Taigang and Baoshan Iron & Steel Co., the second-biggest producer, are making ferritic products to replace more than 40 percent of their 300 series products, Li said. Ferritic products, which contain little nickel, sell for half the price of the 300 series products, which typically contain 8 percent nickel.
Smaller companies are making more stainless steel which contain 1 percent nickel, the so-called 200 series, he said.
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