HONG KONG, Sept. 15 -- China's real consumption of nickel is expected to rise 25 percent on the year to 404,000 tonnes this year, a senior analyst at government-backed research group Antaike said on Monday.
The latest estimated real consumption is 18.8 percent higher than the previous estimate of 340,000 tonnes, due to rising production of stainless steel mills, the top nickel users in China, Xu Aidong said.
But the Chinese market had no shortage of nickel following record imports in the first seven months of the year, while Xu estimated China may hold up to 130,000 tonnes of nickel at private and public warehouses, up 30 percent from July.
"We think stainless steel production will be 9.12 million tonnes this year. It is up from our earlier estimated 8 million tonnes," Xu told Reuters.
The latest stainless steel output estimate will be up 24 percent from last year in the world's top producer.
But Xu said some stainless steel mills may cut production later in the year, given end-users' inventories were rising.
"End-users bought more stainless steel stocks earlier this year when prices were low," Xu said, adding that stocks were weighing on stainless steel prices.
The 304 grades stainless steel, the most popular nickel-based stainless steel in China, was trading around 18,700 yuan per tonne versus 20,700 yuan last month, said a manager at a stainless steel tube plant in Zhejiang province, home of many stainless steel producers and users.
NICKEL STOCKS RISE
Stocks of nickel are also estimated higher than July on record imports and reduced speculators' buying.
"Stocks should stand at 100,000-130,000 tonnes now," Xu said.
China, which consumes about a fifth of the world's nickel, imported 167,758 tonnes of the metal in the first seven months of the year, a year-on-year increase of 123 percent, with July's inflows hitting an all-time monthly record at 47,754 tonnes.
"At least a third of July's imports are still sitting at bonded warehouses," said a nickel sales manager at a trading firm in Shanghai, who estimated well above 10,000 tonnes were stored in Shanghai bonded warehouses.
"It's hard to sell nickel," he said. "Stainless steel mills also hold some nickel stocks."
He added that speculators were not keen to buy more nickel after buying a lot of the metal in the first half.
Speculators are unlikely to resell the stocks in the near future given many expect inflation to emerge in China sooner or later, a factor that usually supports commodity prices.
Antaike expects China to produce 240,000 tonnes of primary nickel this year, of which 80,000 tonnes would come from nickel pig iron, Xu said. The latest estimated output is up 4.3 percent from Antaike's previous forecast.
China's top nickel producer, Jinchuan Group Ltd, plans to produce 130,000 tonnes of the metal this year, up from its earlier plan of 125,000 tonnes, a company official said.