DANGER
LOOMS FOR STAINLESS STEEL SECTOR AS CHINA RACKS UP PRODUCTION
Remarkable growth forecasts
for China’s stainless steel sector were made at a recent industry
meeting in Shanghai. Chinese production capacity in 2006 will be
double the figure in 2004. Moreover, if current expansion plans are
fully realised, China could be melting more than 16 million tonnes
per year in 2010 – equivalent to more than 60 percent of current
world output.
China is already having a determining
influence on global stainless markets. In the first half of this
year, its stainless crude steel production jumped by 54 percent
year-on-year, while output in almost every other country was
falling, according to figures from International Stainless Steel
Forum.
The surging expansion of domestic
production is making China less of an import market, and more of an
exporter in its own right. The oversupply that has characterised the
global stainless steel sector this year may become persistent.
Mills supplying the Asian market are
already suffering. Leading producers – including Posco, Nisshin
Steel and NSSC – have cut back their operating rates in order to
reduce the oversupply that has undermined prices. European mills
have switched more of their exports to Russia, whose own stainless
production has suffered as a consequence – falling 40 percent in
January-August 2005.
One large nickel supplier expects Chinese
stainless consumption to grow by 9 percent per year for the next
decade. Even if this rapid growth rate is realised, it will still
leave China with an exportable surplus of stainless steel from its
newly expanded plants.
Few people believed China would install so
many new stainless production units. Indeed, even some in the
Chinese industry accept that the country is building up excess
capacity that could overhang the market for years to come. Several
other producers are already too advanced in construction work to
cancel their expansions; but they may have to delay start-up or
mothball some installations if they are to protect their
profitability.
