Stainless firms see output cuts' impact muted

By (Reuters)
Updated: 2007-07-09 17:15

Chinese stainless steel mills' plans to cut output of finished products this month will have a limited impact on domestic supplies, as some will not cut primary production and other processors will take up the slack in finished products, company sources said.

They added that they did not expect a significant fall in China's nickel consumption this month.

The top four Chinese stainless steel mills, including Taiyuan Iron and Steel (Taigang) and Baosteel, have said they would cut output by 20 to 30 percent in July to prevent domestic prices from weakening further. They did not specify what the percentage cuts would be measured against.

"There will be no difference in finished products this month. Large mills will just sell more primary product to small producers of stainless steel products instead of processing it themselves," said an official at the Chinese stainless steel unit of POSCO in Zhangjiagang, Jiangsu Province.

Small firms such as rolling plants and processing centres account for half of the country's total output of finished stainless steel products, he said.

"Taigang is only slowing its expansion, while Baosteel will cut some stainless steel product output but will not reduce output of primary products such as stainless steel slabs and billet," an official from one of the four mills told Reuters at a conference held in the eastern city of Wuxi on Saturday.

"This is understandable. Any production cuts would be looked on negatively by the State asset managers."

Execution of the output cut would depend on market demand, a Taigang official said at the conference.

Lower nickel consumption

Baosteel will convert 20 percent of its stainless steel rolling capacity to process carbon steel products, an official at its board office said last week.

POSCO's Zhangjiagang unit will cut output by as much as 30 percent in July due to a 10-day overhaul early this month.

(For more biz stories, please visit Industry Updates)