The Hindu Business Line : China facing glut in stainless steel

Panic has gripped China’s stainless steel industry. This follows a sharp fall in nickel and stainless steel prices. The price situation has forced a joint cut in production from this month.

State-owned and private mills are reportedly working in tandem to support falling prices. Some plants have resorted to production cuts, while others have commenced their maintenance work early.

From the peak of end-May, stainless steel prices had been falling and by mid-July, the market was 25 per cent lower. From around $4,500 a tonne in May, the rates have declined to less than $3,300 a tonne. Steel merchants apprehend there could be a further drop in August when seasonal demand stays weak. The sharp fall in prices and oversupply of stainless steel together with the rapid expansion of production capacity since the second half of 2006 has led to a substantial build-up in stainless steel inventories in China.

On the back of a rapid growth in stainless steel capacity, a strong rise in stainless steel production in the second half of 2006 was about 5.3 million tonnes (mt), 68 per cent higher than in 2005.

For 2007, the forecast output is about 7.3 mt, up 38 per cent year-on-year, Macquarie Research Commodities, quoting China Stainless Steel Association, said, adding that it now believed the cuts in production and demand in July — and in August — will slow Chinese production to 7.1 mt.