QINGDAO (Interfax-China) -- Taiyuan Iron and Steel (Group) Co. Ltd (TISCO) [SSE:600169], China's largest stainless steel maker, will cut stainless steel production in December in an attempt to invigorate the current sluggish market, a company official told Interfax today at 2007 International Seminar on Nickel & Ferro Alloys With Stainless Steel Market in Qingdao.
"We've altered our production target for 2007 from an original 2.3 million tonnes to 2.05 million tonnes, in light of the production cut scheduled for next month," senior economist with TISCO's policy research office, Hao Peigang, said.
TISCO has a policy of tailoring production to market demand, Hao said. "For example, this year's production will increase 950,000 tonnes from last year."
Other major domestic stainless steelmakers, namely Zhangjiagang POSCO [NYSE:PKX] and Guangzhou Lianzhong Stainless Steel [SSE:600894], also plan to cut production of series-200 and series-300 stainless steel in December, Hao said.
China's major stainless steel mills jointly cut monthly production between 20% and 30% in July, in order to combat falling stainless steel prices in the domestic market, Interfax previously reported.
Stainless steel prices on the domestic Chinese market have tumbled in recent months, with prices even falling below the average November ex-works price of steelmakers, due to a fall in nickel prices in mid-November.
The benchmark three-month nickel price on the London Metal Exchange (LME) fell to $28,100 per tonne yesterday, down 17.2% from $33,950 per tonne on Nov. 14.
TISCO estimates that China's apparent stainless steel consumption will reach at least 6.95 million tonnes this year, up 16.81% from last year, while production will increase 45.79% from 5.35 million tonnes last year to 7.8 million tonnes this year.
China will be a net importer of stainless steel to the tune of 400,000 tonnes this year, down 75% from last year, with imports dropping 26% to 1.86 million tonnes, and exports growing 62% to 1.46 million tonnes, Hao said.
"However, economic growth, rather than fluctuating nickel prices, will be the main factor determining stainless steel production and demand in China next year," Hao said, predicting that China's stainless steel demand will climb over 10% year-on-year next year.
If China's GDP grows 7% next year, China will produce 8.88 million tonnes of stainless steel, and consume 7.73 million tonnes next year. While if GDP grows 10% next year, stainless steel production will reach 9.29 million tonnes and consumption will reach 8.08 million tonnes, Hao said.
The China Special Steel Enterprise Association predicts that China's stainless steel capacity will reach 12 million tonnes this year, up 20% from 10 million tonnes last year.
The National Development and Reform Commission (NDRC) announced in a report released yesterday that China will see steel product oversupply in the domestic market next year, due to restrictive steel product export measures.
The Chinese government has launched a series of macro-control measures since May this year, designed to curb excessive steel product exports. The measures successfully reduced steel product exports over the July to October period, and should continue to reduce exports in the coming months.
However, reducing steel product exports, in conjunction with expanding steel smelting capacity, will upset the current balance between production and sales supported by strong exports, resulting in domestic oversupply and subsequent low prices on the domestic market in 2008, the NDRC said in the report.
China produced 408.52 million tonnes of crude steel in the first 10 months of this year, up 18.1% from the same period of last year, while steel product exports surged 63.8% year-on-year to 53.76 million tonnes over the period.
Steel product prices in the Chinese domestic market lifted 8.9% from January to October this year, on the back of growing demand from both domestic and overseas markets, as well as low stockpiles and increased iron ore prices.
(c) Interfax-China 2007. For more intelligence on Chinese metals and mining, contact David Harman in Hong Kong at email@example.com or (852) 2537-2262.