China cuts nickel production as demand weakens

Reuters, 11/11/2008

China's refined nickel output is forecast to fall nearly 10% to around 130 000 t this year from a previous estimate as demands weakens, industry officials said on Tuesday.

Major producers, including the country's largest Jinchuan Group, are cutting output following a slump in nickel prices after steel mills halted and reduced production in China, the world's largest stainless steel producer and nickel consumer.

"Some production capacity has been shut down as the nickel industry is starting to lose money," Wen Xianjun, vice president of the state-controlled China Nonferrous Metals Industry Association, told reporters on the sidelines of a conference.

Wen added that growth in China's base metals production was expected to slow down, while lower demand had led to profit declines in the industry and the aluminium sector was also suffering losses.

State-owned research group Antaike had previously forecast that China's nickel output would rise 6% to 228 000 t this year. Nickel pig-iron plants would account for 80 000 t and refined metals from smelters, 148 000 t.

China produced 103 567 t of refined nickel in the first nine months, up 12% from the same period last year, but output in September fell 16% from a year earlier to 9 491 t, official statistic data showed.

Lower-than-expected production in China, which consumes about a fifth of the world's nickel used in the production of stainless steel, may lend support to world prices that have halved since the end of 2007 due to slackening demand from end-users and the increasing use of pig iron that contains nickel in China.

London Metal Exchange nickel for three-month delivery fell to $11 600/t on Tuesday, 78% off from an all-time high of $51 800 struck in May last year.

Jinchuan Group Ltd, the country's top nickel producer, cut its output by a third in October and November and may further reduce output next month, a company source and a trade source said.

Jinchuan had said the company planned to cut refined nickel output by 20 000 t to 100 000 t this year, due to weak demand in China.

China, the world's top stainless steel producer, is expected to produce 7,8-million tons of crude stainless steel in 2008, up just 2%, after growth of 38% last year, Antaike forecast in September.