China Nickel Imports May Double Despite Slowdown

China may import twice as much nickel as last year, perhaps even more, to feed its growing stainless steel industry, despite a slowdown recently following a strong recovery in London Metal Exchange (LME) prices, traders say.

In addition to scarce nickel concentrates supply, which is restricting domestic production of refined nickel, they say, China will see a shift in demand from stainless steel scrap that is no longer easy to come by in the international market.

"Nickel imports will more than double," said a trader at an international house. "Now there's hardly any stainless steel scrap available."

January customs data showed Chinese imports of refined nickel jumped by 461.4 percent to reach 11,023 metric tons. This is more than a third of 2002 total imports of 31,489 metric tons.

Of the total January refined nickel imports, 3,536  metric tons came from Russia, followed by 2,552  metric tons from Australia and 1,662  metric tons from Canada.

The traders said Chinese imports have since slowed down due to the rebound in LME three month nickel prices, which reached above $9,000 per metric ton last week for the first time since June 2000 before retreating to around $8,950.

Thanks to rapidly falling inventories around the world and increased global production of stainless steel, it has gained more than $150 so far this year after hovering around $7,000 for most of last year.

But the traders expected Chinese domestic prices for nickel and stainless steel scrap to catch up with the international market before long and spur imports again.

"The business is not very active for the time being at such high prices. Importations are getting a bit difficult," said a trader based in China.

Another trader in Shanghai agreed, saying: "Pricewise we have a pretty significant gap... But I guess the market will soon catch up."

Reflecting strong demand from China, LME warehouse stocks in Singapore shrank to a mere 1,596 metric tons by March 3, down from 6,378 metric tons at the start of the year.

Xu Aidong at China's state-owned Antaike Information Development Co Ltd, told Reuters late last month that China's 2003 nickel demand would climb by 26 percent to 116,000 metric tons, while domestic output would total only around 63,000 metric tons.

Asked about the Antaike's forecast, a second trader in Shanghai said: "Their number might be reasonable. But it's very difficult to say. We never know the actual number in China."

"The requirement is huge, but we don't know how huge... China's stainless steel industry is growing, also the plating industry plus the battery industry," the trader added.

The traders said China's production of hot-rolled stainless steel should reach one million metric tons this year, up from around 700,000  metric tons last year, with Taiyuan Iron and Steel Group Co alone adding annual capacity of more than 400,000 metric tons.

On the other hand, the traders were growing increasingly skeptical over China's domestic nickel output due to difficulties in acquiring nickel concentrates and questions over whether it could get as much scrap as it did in the past.

They said the global stainless steel scrap market was tight due to stainless steel production increases in Europe as well as North America in addition to Asia, where China and South Korea were setting up new furnaces.

"I am still checking if it is possible for Jinchuan to produce that amount. They are sourcing their raw materials abroad," the first Shanghai trader said, referring to Jinchuan's plan to churn out 60,000 metric tons. "I think it is very difficult to do that."

The first trader predicted China's 2003 refined nickel production would not exceed 50,000 metric tons.

A stainless steel scrap trader in Beijing said: "It's difficult to say how much we want to import... The prices are too high in the international market. We will decrease demand for stainless steel scrap from the international world."

Another scrap trader based in Shanghai said while international suppliers were asking for $850-$900 per metric ton, CIF China for SABOT grade scrap, Chinese importers were not willing to pay more than $780-$800 at present.