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China’s ferroalloys producers eye shift to stainless

Keywords: Tags  China ferroalloys, stainless steel, production shift, nickel pig iron, production costs, Hongyan Ferroalloy, Taigang Stainless, Shengyang Group

SHANGHAI — Chinese ferroalloys producers might consider a move into stainless steel despite continued weakness in that industry in the first half of the year.

Ferroalloys producers might look downstream due to bottlenecks, aided by an advantageous cost position and a targeted approach in specific markets, some industry sources said.

Chinese stainless mills have been cutting high-grade nickel pig iron purchases since the beginning of the year.

The country’s largest stainless steel mill, Taigang Stainless Steel Co. Ltd., cut its high-grade nickel pig iron buying prices by 23.3 percent to 905 yuan ($147) per tonne in July from 1,180 yuan in January. The average operating rate for domestic nickel pig iron smelters was around 50 percent in June vs. 70 percent in January.

"Mills transferred their pressure from low prices to (nickel pig iron) smelters, so they saved costs and still are able to make money," a Shanghai miner source told AMM sister publication Steel First.

"Rather than being squeezed by mills, why don’t ferroalloys producers extend their industry chain and use the low-cost materials themselves?" a Wuxi-based analyst asked.

Hongyan Ferroalloy Co. Ltd. put a 600,000-tonne-per-year wide plate project into production in June, shipping more than 6,000 tonnes of stainless to the Wuxi market, market sources said.

"This is a good test for Hongyan. They benefit from low raw material costs, and their products are not widely seen in the current market," an east China mill source said. "Taigang is the only producer of wide stainless steel plate. Hongyan’s specific target for the market would make it easier for them to establish a presence."

Shengyang Group Co. Ltd. also extended into stainless from nickel pig iron smelting, investing 6 billion yuan ($973 million) to build an integrated project with a 1-million-tonner stainless strip plant and 1-million-tonne-per-year ferroalloys unit.

Since ferroalloys producers would be able to hot charge by connecting their production of ferroalloys and stainless, they could lower costs below those of mills, resulting in potential savings of 600 to 1,000 yuan ($97 to $162) per tonne, market sources said.

"Having two options means these privately owned companies could make their business more flexible. They can choose either side, depending on the market," the mill source said.

A version of this article was first published in AMM sister publication Steel First.

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