* Resurgence of 300 series stainless output is big story
* Chinese stainless output to rise 7.8 pct this year: CRU
* Philippines struggling to maintain exports anyway
By Pratima Desai
LONDON, Oct 12 Nickel's rally is expected to be
sustained by robust demand from China's stainless steel mills, a
significant factor behind recent price gains which many think
are mainly due to worries about supplies from the Philippines.
Stainless steel contains nickel and chromium which slows the
rate of corrosion significantly. Normal, or carbon, steel
without nickel or chromium rusts easily.
It is used in infrastructure such as bridges and structural
beams, household items such as cutlery, drums for washing
machines and kitchen sinks. Oil pipelines and medical equipment
are also made out of stainless steel.
Demand has been growing due to Chinese infrastructure
investment and higher living standards mean stronger consumer
demand for domestic goods made out of stainless steel.
Benchmark nickel is up more than 40 percent since
hitting a 12-year low of $7,550 in February.
Recent data from the International Stainless Steel Forum
showed Chinese output at 11.73 million tonnes between January
and June, up 7.9 percent from the first six months of last year.
Beneath those numbers is another story; rising output of 300
series stainless containing around eight percent nickel at the
expense of 200 series with only 1-2.5 percent nickel and 400
series which contains no nickel.
"The big story this year is the resurgence of 300 series
production in China, possibly a structural shift," said Jim
Lennon, founder of Red Door Research, adding it would support
nickel for some time.
Stainless steel producers switched to 200 or 400 series when
nickel surged to record highs above $50,000 in May 2007.
But at around $10,500 the cost of using nickel is no longer
CRU Group estimates Chinese stainless steel production will
rise 7.8 percent this year to 23.2 million tonnes, but expects
growth next year to slow to 2.1 percent.
"We expect output of 300-series stainless steel to rise in
2017, benefiting from the growth in overall stainless
production." said CRU analyst Olivier Masson.
About two-thirds of nickel demand estimated at around 1.9
million tonnes comes from stainless mills; a large proportion of
these are in China where nickel imports rose nearly 45 percent
year-on-year in August to more than 29,000 tonnes.
Some of the impetus for higher prices came from an
environmental crackdown in the Philippines -- top nickel ore and
concentrate exporter to China. But this could be offset by
higher supplies from Indonesia which is looking at amending the
ban on unprocessed ore.
The Philippines shut 10 mines in August and last month
recommended another 20 be suspended -- 12 of them nickel.
However at end-September government said it would give mines
time to address problems -- a softening of its stance.
"The Philippines have been struggling to maintain exports
anyway. Production is down partly because of reserve depletion,
they've been exporting from stockpiles," Lennon said.
Between January and August the Philippines exported 18.7
million tonnes of nickel ore and concentrate to China, a 21
percent drop from the same period last year.
Citi analyst David Wilson is not convinced disruptions in
the Philippines will have a lasting impact and said anti-dumping
duties on Chinese stainless in the United States and Europe
would limit its exports.
But sources say Chinese stainless has already been finding
its way to other countries in Asia such as Taiwan.
(Editing by Ruth Pitchford)