January 16, 2008 / 8:05 AM / 12 years ago

China cuts yearly nickel bookings on stocks, prices

HONG KONG, Jan 16 (Reuters) - Chinese firms are cutting imports of refined nickel on an annual basis in 2008, and will instead rely on material left over from last year or gamble on falling prices, industry sources said on Wednesday.

But China’s demand for imports could still rise by 15 percent this year as stainless steel mills seek metal on the international spot market.

“We have booked 300 tonnes a month this year. Last year we got 380 tonnes a month,” a trader in Shanghai said, referring to term imports.

“We are afraid that Chinese prices will be lower than those on the international market,” he said.

In 2007, nickel MNI3 hit a record $51,800 a tonne in May, but ended the year almost 50 percent lower at $26,200, causing big losses to many Chinese importers. Some analysts predict the price could fall below $20,000 this year.

On Wednesday LME cash nickel MNI0 was at $28,185 a tonne versus 249,500 yuan ($34,460) a tonne for spot metal in China.

Nickel consumption in China, which accounted for about a fifth of the world’s nickel demand last year, may rise 32,000 tonnes, or about 11 percent, to 345,000 tonnes this year as China’s stainless steel production rises, said Xu Aidong, senior analyst at Antaike Information, a state research group.

Stainless steel production is expected to rise 42 percent to 7.6 million tonnes last year out of capacity of up to 20 million tonnes, indicating another output jump this year.

But some stainless makers are well supplied and were yet to think about buying more nickel.

Baosteel Group (600019.SS), China’s second-largest producer of stainless steel, has not finalised annual nickel bookings for this year, a purchasing manager said.

“We have not discussed about the term bookings because we have nickel stocks carried from last year,” the manager said.

A purchasing manager at Shanxi Taigang Stainless Steel (000825.SZ), the country’s top stainless steel mill, said the firm would use more nickel pig iron, a cheaper alternative for refined nickel.

Other stainless steel mills will buy domestically produced nickel from Jinchuan Group Ltd, China’s largest nickel smelter.

“A few big clients do not want to book term imports because they have contracted some metal with Jinchuan for the first time in many years,” a manager at a trading firm in Inner Mongolia said.

This may suggest that Jinchuan holds stocks carried from last year after large stainless steel producers cut production on high nickel prices and weak demand.

Jinchuan will produce about 120,000 tonnes of refined nickel this year, up 9 percent from last year, out of capacity of 150,000 tonnes, a company official said.

Antaike sees national nickel output rising 9.5 percent to 243,000 tonnes this year, of which 100,000 will be nickel contained in pig iron.

Last year, China produced 222,000 tonnes of nickel, with nickel pig iron contributing 95,000 tonnes. ($1=7.240 Yuan)

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