China's ferronickel companies, suppliers of main material of stainless steel, are pessimistic about the market due to the low demand for stainless steel.

   Although China has a big stainless steel production capacity, the market demand from downstream remains at a low level this year, which makes ferronickel companies get less orders and see poor sales.

   Thus, many of these companies have ceased production or changed production lines, and some, especially those using blast furnaces, have approached the bottom line of production costs in 2008.

   However, most ferronickel companies believe that they will persist in operation, by cutting output but not the price. They expect the downstream stainless steel companies to arrange acquisition plan rationally, so that both the two sides will depend on each other.

   China's stainless steel companies suffered from a sharp fluctuation of nickel price in 2007. They bought in a large amount at high prices in the first half when the nickel price surged; and had to lower their production prices in the second half when the nickel price plummeted. This made stainless steel companies prudential about ferronickel acquisition this year.