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Chinese stainless mills plan 40% cut in outputChinese stainless mills are planning to slash production by 40 percent and drop prices at the start of 2008 to prop up a limp market, according to market participants."Major stainless mills have basically agreed at their internal meeting on Wednesday to collectively cut output by about 40 percent in January to support the weak market," a market source close to the situation told MB. "Stainless mills will also slash their ex-works prices for next month, but the specific extent is still unclear. I think the benchmark prices could be reduced by around 2,000 yuan ($271) per tonne," he added. That would be a six percent cut, based on current prices. An official from Taiyuan Iron & Steel said prices could be reduced by even more than that as producers follow the recent downward course of the nickel price, and demand stays sluggish. "I have not got any information about the price adjustment yet, but I personally predict that the price is likely to be lowered by 2,000-3,000 yuan per tonne," he said. "Nickel prices on the London Metal Exchange have declined strongly compared with a month ago, and meanwhile the existing stainless market retailing prices remained lower than our ex-works prices," he added. Chinese stainless mills kept their listed ex-works prices for benchmark product 304 2mm cold rolled coil unchanged at 34,400 yuan per tonne in December in the face of weak domestic demand (MB Nov 26). The Taiyuan official did not confirm if the company would reduce output in January along with other major stainless mills, but said he anticipated other producers doing so. "Stainless mills will have to make a real cut of their output in January. The market demand has kept weak for long now, and the market could be further affected by the coming one-week Spring Festival holiday in February," said a Shanghai-based trader. "If the major stainless producers do stand out together to promise an output cut plan this time, they may better follow through on their production cuts," he added. Major stainless mills in China previously suggested they would lower production in December, but some market participants doubt they are following through on their announced production cuts as the domestic market remains sluggish and stocks high (MB Dec 11). "The stainless mills may not have cut output this month, but I feel they are really controlling market deliveries," said a second Shanghai-based trader.
Thursday, December 20, 2007
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