China’s GDP grew by a strong 10.7% in 2006, the fastest pace in more than a decade. This strong economic activity enabled the stainless sector to enjoy astonishing growth in 2006. China has become the world’s largest stainless steel producing country with crude stainless steel output of about 5.3 million tones in 2006, up by 67% from 2005. China has continued to be the largest stainless steel consuming country in the world for the 7th consecutive year with apparent consumption of 6.35 million tones in 2006, up by14% on y-o-y basis compared with 5.58 million tones in 2005. About 81% of Chinese SS apparent consumption is flat products, 16% is long products. In 2006, output of finished stainless steel products from local melting reached 4.5 million tones, i.e. an increase of 69.5% over 2005.China’s self-sufficiency in stainless steel continued to rise from 50% in 2005 to 70% in 2006. Mainland China’s stainless steel imports decreased by 19% to 2.5 million tones in 2006 from 3.1 million tones in 2005, where 54% was hot-rolled coils/plates and 29% was cold-rolled coils/sheets/strips. In contrast, stainless steel exports from mainland China more than doubled to some 900kt in 2006, from almost 400kt in 2005. The start up of new facilities such as TISCO’s 1,500kt/y stainless melt shop in September, ZPSS’s 800kt/y stainless melt shop and LISCO’s 1,000kt/y stainless melt shop has built up China’s strength in the stainless industry. TISCO. With its integrated stainless mill, now has stainless melt capacity of 3 million tones per year. In 2006, both TISCO and Baosteel’s crude stainless production each exceeded one million tones, and accounted for 42% of China’s total stainless steel production. State-owned enterprises produced 55% of total stainless melt production in 2006, private-owned enterprises and Joint Ventures produced 42% and 3% of total stainless melting, respectively. New stainless melt facilities of private-enterprises such as Southwest(300KMT), Quanxin(180KMT) and Shanxi Huanhai(200KMT) started production in 2006, and have the flexibility to produce either 200 series stainless or 300 series stainless as the market requires. The Chinese stainless industry has continued to grow strongly in 2007 due to additional stainless melt capacity and strong local demand. | 
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