QINGDAO (Interfax-China) -- China may become a net exporter of stainless steel next year despite current nickel ore shortages, though restrictive export policies will prevent large-scale exports, industry insiders told Interfax at the 2007 International Seminar on Nickel & Ferro Nickel Alloys with Stainless Steel Market in Qingdao on Friday.
"China's stainless steel exports have been on the rise for the last three years, while imports have been decreasing, and it's expected that this trend will continue. However, various factors will prevent China from becoming the world's stainless steel supplier," Xu Aidong, an analyst with Beijing Antaike, a leading consultancy affiliated with the China Nonferrous Metals Industry Association (CNMIA), said.
Antaike predicts that China's stainless steel exports will increase 44% from last year to 1.3 million tonnes this year, while imports will drop 16% to 2.1 million tonnes over the period.
Jiang Xinfang, a senior official with Qingshan Holdings. Co. Ltd., China's largest privately owned stainless steel maker agreed with Xu, saying that "China will hopefully become a net stainless steel exporter next year. However, the possible VAT export rebate cancellation on China's stainless steel products early next year, along with further renminbi appreciation, may limit net exports."
"It's only a matter of time before China becomes a net exporter of stainless steel. It will either be this year or next year, as the country is already self-sufficient in supply. However, restrictive export policies will impact the scale of China's exports," Stephane Chorlet, a ferronickel sales and product manager with Eramet, said.
There is speculation in the domestic market that the Chinese government may next year cancel the existing VAT export rebate on all stainless steel products of between 8% and 11%. The central government slashed the VAT export rebate on several kinds of stainless steel products, including both hot-rolled and cold-rolled stainless steel plate, from 11% to 8% on Sept. 15 this year.
China's GDP is forecast to increase 11% this year, while stainless steel production is set to expand 42% from last year to 7.6 million tonnes, outpacing the apparent consumption of between 6.7 million tonnes and 7 million tonnes. Moreover, China's stainless steel consumption will maintain 10% growth per year for the next three years, Antaike said.
One of the main reasons limiting over-expansion in China's stainless steel sector is the country's insufficient nickel supply, a major raw material for stainless steel production.
"The Indonesian government is very likely to release policies banning primary laterite ore exports, and only allowing exports of processed ore or finished nickel products, in June next year. Although we do expect a six to 12-month buffer period before the policy takes effect, the policy will eventually make China's nickel ore procurement more difficult," Jiang Xinfang from Qingshan, said.
China mainly imports laterite ore from Indonesia, New Caledonia and the Philippines.
Xu from Antaike said that China's apparent consumption of primary nickel (including nickel pig iron, nickel salt and electrolytic nickel) will reach 340,000 tonnes this year, with average nickel metal shortages set to reach 100,000 tonnes per year between 2008 and 2011, leaving the country no choice but to rely on imports.
China's primary nickel output is expected to surge 53.8% from last year to 221,000 tonnes this year, a large proportion of which will come from nickel pig iron production, which is due to triple to 95,000 tonnes over the year. However, China will still need to import 152,000 tonnes of nickel metal this year, Xu said.
Increased nickel pig iron production has to some extent alleviated China's dependency on nickel imports. China started large-scale pig iron production in reaction to high nickel prices in 2005. However, using nickel pig iron instead of nickel for stainless steel production is only profitable if nickel prices remain above $18,000 per tonne.
China still has the potential to expand nickel pig iron production, with a large number nickel mining projects due to come online after 2009, bringing approximately 400,000 tonnes of nickel on to the domestic market, including CVRD-Inco's [NYSE:RIO; TSX:N] Goro project, BHP Billiton's [NYSE:BHP] Ravensthorpe project and China's MCC Ramu project in Papua New Guinea.
(c) Interfax-China 2007. For more intelligence on Chinese metals and mining, contact David Harman in Hong Kong at firstname.lastname@example.org or (852) 2537-2262.