According to:

http://www.chinamining.org/News/2009...

China's primary nickel output is is expected to grow 11 percent to 230,000 tonnes in 2009, while stainless steel output will fall 6 percent, a senior analyst at state-owned research group Antaike said on Wednesday.

Nickel output will rise due to plans to increase production at major producers such as Jinchuan, Xu Aidong told reporters on the sidelines of an industry conference.

But production of stainless steel, a process which consumes the largest amount of nickel, is expected to fall to 6.9 million tonnes in 2009 compared with 7.34 million tonnes in 2008 due to the downturn in the economy, Xu told the conference.

"Some stainless steel plants have cut production this year, but others are running at more than 60 percent of their production capacity," Xu said, adding that after 2009 China's stainless steel output is set to grow at 8 to 10 percent.

Industry officials said stainless steel production had picked up quickly this year, but uncertainties remain.

"Stainless steel production has been improving in the first five months, but there are concerns if downstream demand will be able to support the trend through the third and fourth quarters," said Jiang Xinfang, president director at Shanghai Tsingshan Mineral Comapny Ltd, a subsidiary of the country's top private stainless steel producer Tsingshan Holding Group.

NICKEL PIG IRON TO SURVIVE

Producers of nickel pig iron, a once cheaper substitute for nickel in stainless steel production, suffered as nickel prices tumbled from their peaks in mid-2007. But industry officials said it has a future.

"Nickel pig iron with low nickel content is not going away. At current the nickel price level, although most nickel pig iron plants have closed down, a number of them are still operating," said Jiang of Tsingshan.

Jiang said NPI with a low nickel content is appealing anyway because of its iron content.

"At the $12,000 price level, even producers of NPI with medium or high nickel content can start making a profit," he said.

Nickel for three-month delivery on the London Metal Exchange is at $12,675 a tonne, up from about $9,000 last December.

China's nickel pig iron output in 2009 is likely to fall to about 600,000 tonnes this year from 700,000 tonnes in 2008, Antaike' Xu said.