China will produce around 26 million tonnes of stainless steel this year, up 0.9% from 25.77 million tonnes a year ago, the China Ferroalloys Industry Association (CFIA) said.

This increase - at a slower pace than has been typical in recent years - will derive from upgrading existing technology at mills.

The pace of demand growth in the country will exceed that of production, CFIA secretary-general Shi Wanli said at the third China Steel Derivatives International Conference in Shanghai on Thursday June 21.

It forecasts domestic consumption to rise to 21.13 million tonnes this year, up 6.4% from 19.86 million tonnes in 2017.

China has been the world’s largest producer of stainless steel since 2006, accounting for 53.6% of production worldwide in 2017, up from just 12.9% in 2005. Global melt shop output was 48 million tonnes in 2017, according to figures from the International Stainless Steel Forum (ISSF).

But tariffs imposed by the European Union and the United States have removed its competitive advantage in exports.

In March this year the European Commission extended existing anti-dumping duties - ranging from 48.3% to 71.9% and that were initially imposed in 2011 - on Chinese imports of seamless pipes and tubes of stainless steel for another five years, for example.

The EC now has 53 measures in place on steel and iron products, including 27 on products from China, it said in March when extending the duties on stainless tube and pipe.

Measures such as these have increased the Chinese stainless steel’s reliance on domestic demand, Liu Yanping, secretary-general of the Stainless Steel Council of China Special Steel Enterprises Association, said.

Increased domestic demand will at least help to ease oversupply in China's stainless steel sector. Overcapacity was 4 million tonnes in 2015, domestic steel consultancy Lange Steel Information Center said.

China has great potential in terms of demand growth - domestic consumption of stainless steel per capita is around 14.35 kilograms, Liu said. Although this is a big jump from 1.4 kilograms per capita in 2000, “it is much below the level of developed countries in Europe and North America,” the CFIA’s Shi said.

Government efforts to boost infrastructure - such as the “One Belt, One Road” initiative - and increased consumer spending power should maintain the rate of growth in Chinese consumption of stainless steel over the coming years.

Metal Bulletin assessed the price of China domestic grade 304 stainless steel cold rolled coil (2mm) at 15,200-15,600 yuan ($2,340-2,402) per tonne on June 21, up from 13,000-13,600 yuan per tonne a year ago.