_.Analysis of China stainless steel market situation.

World stainless steel industry has gained fast development during recent 20 years. Global stainless steel production has reached 6.435 mln tons in 1980 and Japan & USA were the biggest producers in the world. In recent five years, China stainless steel production has rocketed, and since 2001, China stainless steel apparent consumption has kept the largest in the world, exceeding the total of Japan & USA. Due to severely insufficient stainless steel in China, market demand mainly depends on importing. Moreover, China stainless steel productivity has expanded gradually.

Besides TISCO & Baosteel (the largest stainless steel producers in China), some private enterprises including foreign-invested companies are also enlarging their stainless steel productivity.

In view of stainless steel productivity, primary statistics shows, up to the end of 2005,China stainless steel smelting productivity has reached 4 mln tons, up 400,000 tons against last year (including Bohai Stainless Steel & Huate Stainless Steel). After technology innovation, current productivity of TISCO has reached 1 mln tons and that of Baosteel Stainless Steel has touched 800,000 tons.

Affected by market situation, Baosteel etc have put off their 1-mln tons new program. The total productivity of Nantong Special Steel & Dongbei Special Steel etc SOEs and Ruitian, Jiuli & Weida etc private stainless steel enterprises has reached 2.2 mln tons.

As for HR flat products, in 2005, besides new 700,000-ton HR flat productivity of Baosteel, other new productivity includes Southwest Stainless Steel, Shanxi Huanhai Stainless Steel with total new productivity reaching 1.4 mln tons and up to the end of 2005, China HR stainless sheet/coil reaching 3.9 mln tons. For detail, Baosteel stainless steel HR sheet productivity is 1.4 mln tons; TISCO 800,000 tons and Youte & Huaguang etc 1.7 mln tons.

As for CR plate/coil, Baosteel, SKS, TISCO, QPSS and LISCO etc have adopted new CR stainless plate with 1.15 mln tons productivity. Up to the end of 2005, China CR stainless steel plate/coil productivity has reached 3 mln tons. For detail, TISCO CR productivity has touched 800,000 tons; Baosteel (SKS, Ningbo Baoxin) 900,000 tons and the total of LISCO, POSCO & Huaqing etc 1.3 mln tons.

As for bar products, Baosteel has 350,000 tons stainless bar products productivity and Dongbei Special Steel, Xining Special Steel etc all have stainless bar products & wire rod productivity. It is predicted that China stainless bar products & wire rod productivity has reached 1 mln tons.

In view of stainless steel production in China, related statistics shows, China stainless steel production was 950,000 tons in 2002; 1.78 mln tons in 2003; 2.36 mln tons in 2004 and 3 mln tons in 2005. As half production of stainless steel in China is produced by private enterprises, affected by related systems in China, its national stainless steel statistics is not so accurate (smaller production than the actual). However, above statistics shows, China stainless steel production has soared in recent years.

Steel market has fluctuated in 2006, thus China stainless steel production has dived. According to the statistics from China Special Steel Enterprises Association (SSEA), stainless crude steel produced by China 32 main stainless steel producers has reached 820,000 tons for Jan-Jul 06, up 3.4% year on year. For detail, chrome stainless steel production has reached 290,000 tons, down 10.9% year on year; chrome-nickel stainless steel 500,000 tons, up 9.4% year on year.

Stainless steel production has reached 980,000 tons including 214,000 tons stainless sheet. Due to high nickel price this year (LME nickel price has reached 25,000 USD/ton, three times more than that in 2004), China stainless steel producers have to perfect product structure. As a result, Austenitic stainless steel production has decreased while chrome stainless steel has soared, therefore, chrome stainless steel quota has reached 40% form previous 25%.

In view of China stainless steel export & import situation, China mainly imports stainless steel. Since 1999, China has been a stainless steel importer and in 2004, import volume has accounted for 65% of its total consumption, sharing one fifth of global trade volume. Driving by strong market demand, China stainless steel productivity & production have soared in recent years and self-supply rate of China-made flat products & CR sheet has greatly improved, thus China stainless steel import rate has slowed down with clear export growth.

Generally speaking, China stainless steel import volume has kept above 3 mln tons. China has imported 2.87 mln tons stainless steel in 2003 and exported 150,000 tons; imported 2.83 mln tons and exported 390,000 tons in 2004; imported 3.02 mln tons and exported 290,000 tons in 2005; imported 1.4 mln tons and exported 500,000 tons during Jan-Jul 2006. As for import structure, currently China mainly imports stainless flat products. The import volume of stainless strip has reached 1.3 mln tons for Jan-Jul 06, accounting for 90%. CR sheet volume has reached 300,000 tons; HR medium plate 660,000 tons; HR sheet 160,000 tons. HR medium heavy & wide strip and CR sheet are the most various imported products.

In view of China stainless consumption, affected by inaccurate statistics of private stainless steel mills, adding smuggles of stainless steel in previous years, China stainless steel consumption growth is not so correct. Generally speaking, in long-term view, China stainless steel consumption has grown gradually. In the consideration of over-lapped steel, just by calculating of 85% of China stainless crude steel production (that is 15% of crude steel recycling rate), adding to net import volume of stainless billet, China stainless steel apparent consumption situation is in following table for recent years. Generally speaking, China stainless steel consumption has doubled during the tenth five-year plan period with less growth rate during recent years:

Unit: 10,000 tons
Year 2000
Crude steel production - 70
Import volume - 109
Export volume - 1
Consumption volume - 168

Year 2001
Crude steel production - 90
Import volume - 167
Export volume - 1
Consumption volume - 253

Year 2002
Crude steel production - 110
Import volume - 240
Export volume - 4
Consumption volume - 330

Year 2003
Crude steel production - 178
Import volume - 296
Export volume - 16
Consumption volume - 454

Year 2004
Crude steel production - 236
Import volume - 289
Export volume - 40
Consumption volume - 449

Year 2005
Crude steel production - 290
Import volume - 302
Export volume - 41
Consumption volume - 507

Year 2006 (predicted)
Crude steel production - 330
Import volume - 250
Export volume - 50
Consumption volume - 480

Judged from recent two-year stainless steel market situation, since 2004, China stainless steel market price has gradually inched up, but at the second half year of 2005, along with sliding steel product market price in China, stainless steel price has also started to fall. Up to the beginning of 2006, along with nickel price rise and China steel product price rebound.

In view of China current market situation, among stainless steel smelting productivity in China, productivity by converter & electric furnace has accounted 50% of the total stainless steel productivity in China respectively. For detail, Baoteel & TISCO have constructed their own stainless steel production lines; ZPSS & SKS etc have produced CR products by importing HR sheets; private stainless steel mills in Jiangsu & Zhejiang etc manufactured stainless steel by electric furnace, mainly producing strips.

At present, both stainless steel SOEs & private enterprises in China have adopted modern technology & techniques. Along with insufficient stainless steel productivity and low market price, chrome-manganese (200 series) stainless steel production has soared, but stainless steel products made in China & imported from other countries is against national & international standards, bringing some questions to China stainless steel market. In 2004, China 200-series stainless steel production has accounted over 30% of China total production. Therefore, China should control 200-series stainless steel market and limit its fast development.

In view of China stainless steel product, in recent years, the good development situation of China stainless steel industry in the future has attracted many enterprises to carry out stainless steel programs. At present, large stainless steel smelting programs includes TISCO with 1.5 mln tons, Baosteel with 800,000 tons, Jiuquan Steel with 500,000 tons and ZPSS with 600,000 tons. It is predicted that current productivity of stainless steel smelting programs under construction has reached 3.7 mln tons in 2006.

After the complete construction, China crude stainless steel productivity will reach 7.7 mln tons. In 2007, new 2.5 stainless steel productivity of Tangshan Stainless Steel will put into operation and in 2008, another 2 mln-ton program is under plan. Up to 2010, China stainless crude steel productivity will reach 12 mln tons. In view of HR/CR structure of stainless products, in 2006, the productivity of Huaye HR stainless steel program has reached 600,000 tons and that of ZPSS, SKS, Jiuquan Steel & LISCO 2.5 mln tons. Up to the end of 2006, China HR stainless flat productivity will reach 6.4 mln tons.

The productivity of stainless HR products under construction will reach 5 mln tons during 2007-2008. Up to 2010, the productivity of China stainless HR products will touch 11.5 mln tons. The productivity of China stainless CR programs put into operation in 2006 will reach 1.2 mln tons. The productivity of China stainless HR products during 2007-2008 will reach 3 mln tons; and up to 2010, that of China stainless HR products in 2010 will reach 7 mln tons.

These Analysis are from the largest China steel website: www.steelhome.cn


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