Stainless Steel demand to stay weak amid concerns of an economic slowdown 
China - 2008 August 21  

Stainless steel demand in China, the world's largest producer, will stay weak next month amid concerns of an economic slowdown, the country's three largest producers said.

“The market hasn't improved,” Chai Zhiyong, vice president of Shanxi Taigang Stainless Steel Co., the largest maker, said over the phone.

“It's still weak,” he said. Building demand normally picks up in September when the weather cools.

China's economy expanded at the slowest pace since 2005 in the second quarter as the government tightened credit, and home prices rose at the lowest rate in 14 months in July. Korea's Posco and India's Jindal Stainless Ltd. this month cut prices.

“There is a lack of incentives to boost demand,” said Jasmine Qi, a Beijing-based stainless-steel analyst at CRU International Ltd.

“China's tightening measures are likely to stay in place after the Olympics” this month, she said.

Baoshan Iron & Steel Co. and other Chinese stainless steelmakers may raise production by as much as 15 percent in September from August, Macquarie Bank Ltd. said in an Aug. 20 note, without saying where it got the information.

Shanghai-based Baoshan, China's second-largest maker of the alloy, probably won't raise its output as “demand for stainless steel hasn't recovered,” Wang Chengxue, assistant to the president of the stainless steel unit, said in an interview.

Taigang won't lift output next month, Chai said late yesterday.

Stalled Nickel Purchases
Baoshan Steel fell 5 percent, the biggest decline since July 16, to close at 6.95 yuan in Shanghai trading. Taigang dropped 4 percent to close at 7.80 yuan in Shenzhen.

A stalled recovery for stainless steel may deter producers from buying more nickel, used to make the alloy. Nickel prices have dropped 24 percent this year as steelmakers cut purchases.

Posco, Asia's largest maker of stainless steel, is cutting production by 25,000 metric tons, or 20 percent of a monthly average, it said Aug. 12. It cut prices by as much as 10 percent.

“Demand for the 300-series products hasn't had any signs of recovery,” said Charles Lin, a marketing manager of Lianzhong Stainless Steel Corp. Lianzhong, Yieh United Steel Corp.'s Guangzhou plant, is the nation's third-biggest stainless steel mill. The 300-series is a benchmark product that has a nickel content of 8 percent.

Jinchuan Group Co., Asia's largest nickel producer, cut the metal's price by 4 percent to 149,000 yuan ($21,753) a ton on Aug. 7, reflecting the decline in global rates. The selling price is very close to its breakeven level, CRU's Qi said.

Chinese mills expanded crude stainless steel capacity faster than demand growth in the past two years. Capacity has exceeded 8 million tons, compared with demand of 7.4 million tons, Taigang Chairman Li Xiaobo said July 24.

Taigang, based in Taiyuan, Shanxi province, slashed output of crude stainless steel by 50 percent in May, and has kept production unchanged at 170,000 tons a month in June and July.

China's stainless steel output gained 5.5 percent to 3.8 million tons in the first six months, according to the Stainless Steel Council of China Special Steel Enterprises Association. China's imports of nickel and alloys gained 21 percent to 65,599 tons in the period.

Source: Bloomberg


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