BEIJING, Aug. 17 -- Nickel demand growth in China, the world's biggest consumer, will slow this year as stainless steel production cools and as competition persists from lower-cost alternatives, said Beijing Antaike Information Development Co.
Consumption of the metal used to boost corrosion resistance may increase by as much as 4.5 percent to 460,000 metric tons from 440,000 tons in 2009, Xu Aidong, senior nickel analyst at Antaike, said in an interview today. Demand jumped 33 percent last year from 330,000 tons in 2008, Xu said.
Nickel for three-month delivery has dropped 22 percent from a 23-month high in April as supply increased and on concern that the global economic recovery is faltering. China's industrial production advanced at the slowest pace in 11 months in July as government lending curbs restrained the economy.
"It's hard to see nickel demand continuing to grow as fast as before in the next few years," Xu said. "After all, China is already the biggest stainless steel maker and part of that capacity is idled now."
China will probably produce almost 11 million tons of stainless steel this year, 13 percent more than the 9.7 million tons in 2009, and compared with a capacity of 12 million to 15 million tons, according to Antaike estimates.
Xu's prediction is lower than from some other analysts and industry executives. Demand may increase 18.6 percent to 510,000 tons, according to Toru Higo, general manager of the nickel sales and raw material department at Sumitomo Metal Mining Co., on July 13. Consumption may be 545,000 tons, said Jim Lin, a consultant in Beijing with research firm CRU International Ltd.
Industrial production growth in China slowed to 13.4 percent in July, while new lending, producer prices and money supply also increased at a weaker pace, according to reports last week. Growth in urban fixed-asset investment cooled, rising 24.9 percent in the first seven months from a year earlier. That compared with a 25.5 percent first-half gain.
Baoshan Iron & Steel Co., the country's second-biggest stainless steelmaker, said in May the company was "not very optimistic" that consumption growth for stainless steel in China would match last year's rate.
Apparent growth may be 5 percent because of a slowdown in China's property market and the European economy, Lou Dingbo, general manager of Baoshan's stainless unit, said then, without providing an exact figure for 2009. The company may increase use of nickel pig iron because it's more competitive, he said.
"Stainless steel demand in China is just so-so now," said CRU's Lin. "Even the big mills have chosen nickel pig iron to control costs because downstream demand is sluggish."
Nickel pig iron is more attractive when the refined price exceeds $20,000 a ton, he said. Metal for three-month delivery on the London Metal Exchange traded at $21,551 a ton today. Cash metal in Changjiang, Shanghai's biggest physical metals market, was quoted around 165,500 yuan ($24,331) a ton.