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“The project has been completely cancelled, not just delayed, due to a change in the business situation,” a senior NSSC official told Steel First.

Production at the 200,000-tpy plant was slated to start in June 2014, but Japan's largest stainless steel producer said the partners have decided to abandon the project due to a worsening outlook for demand conditions amid a glut of stainless steel supply in China.

A total of 1.5bn yuan ($15.3 million) was to have been invested in the construction of the plant, in which Xinan Stainless was to take up a 40% stake, NSSC 25%, and trading house Sumitomo Corp 35%.

The scrapping of the project will be a big blow to Xixan Stainless, which had been looking to use it to expand and diversify its production. The company currently has an annual capacity of 600,000 tonnes of hot rolled stainless coils.