POSCO cuts monthly stainless steel output 20 pct

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The monthly reduction of around 130,000 tons would continue to early next year, said a POSCO official, who declined to be named.

SEOUL (Reuters) - POSCO <005490.KS>, the world's fourth-largest steel maker, started in early December to reduce monthly stainless steel output by 20 percent, responding to slower demand, company officials said on Friday.

The monthly reduction of around 130,000 tons would continue to early next year, said a POSCO official, who declined to be named.

"Chinese and European stainless steel makers are also trimming output. We have no choice," he added.

The South Korean steel maker will also cut prices of stainless steel products by about 10 percent per ton, effective from December 17, with 300-grade hot-rolled stainless steel products falling to 3.40 million won ($3,669) per ton, from 3.80 million won.

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The price of 300-grade cold-rolled stainless steel will be cut to 3.67 million won from 4.07 million won.

The moves come after customers have delayed orders for stainless steel, anticipating that prices would fall further due to tumbling nickel prices, a key input in the alloy.

"Volatile nickel prices and concerns over global economic growth have hit the stainless steel market again," said another company official, who also declined to be named.

Global nickel prices have fallen 50 percent since hitting an all-time high of $51,800 per ton in May on growing worries about demand as credit market problems spread to the broader economy.

Three-month nickel <MNI3> at the London Metal Exchange was trading at $25,650 per ton.

POSCO had already cut stainless steel output by 135,000 tons for the third quarter. It produces around 2 million tons of stainless steel a year.

Taiyuan Iron and Steel Group, China's largest stainless steel mill and parent of Shanxi Taigang Stainless Steel Co <000825.SZ>, has lowered its production target for 2007 to 2.08 million tons, from 2.3 million tons set early this year, due to poor sales, a company source said early this month.

Taigang will cut sales volume of major stainless steel products by 30 percent in December compared with November, after cutting sales by 20 percent each in October and November.

(Reporting by Kang Shinhye; Editing by Sei Chong)