By Glenys Sim

April 29 (Bloomberg) -- Production of nickel pig iron in China, the world’s largest consumer of nickel, jumped to a record in the first quarter after prices more than doubled in the past year, according to a researcher.

Output of nickel contained in pig iron, a low-cost substitute for the refined metal, more than tripled to 44,000 metric tons in the first three months, said Wang Chongfeng, an analyst at Shanghai Metals Market, a unit of researcher CBI China. March output reached a record 17,400 tons, she said.

“Nickel pig iron producers ramped up output as it has become quite profitable following such a large increase in prices,” Wang said today by phone from Shanghai. “Restocking by stainless steel producers has also driven demand.”

Nickel for three-month delivery on the London Metal Exchange is the best-performing commodity this year, climbing 39 percent as stainless steel producers, the biggest users of the metal, increased output as the global economy recovers. It advanced to a 23-month high of $27,595 a ton on April 16 and last traded at $25,770 at 4:04 p.m. in Singapore.

China’s production of nickel pig iron is expected to exceed 50,000 tons in the second quarter, said Wang, driven by demand from domestic stainless steel mills. Nickel is used to make the alloy more resistant to corrosion.

Nickel Output

Output of refined nickel in China grew 25 percent to 47,400 tons in the first quarter from a year earlier, according to the National Bureau of Statistics. Total nickel output may rise to 313,000 tons this year from 278,000 tons, Xu Aidong, an analyst at Beijing Antaike Information Development, said on April 22.

“What happens in the second half of the year will depend largely on international prices and China’s demand, both of which aren’t so clear,” said Wang. “Domestic stainless steel prices have not risen as much as the price of the raw materials used to make them, which has already resulted in some producers switching to making 400-series or 200-series from 300-series.”

The 300-series of stainless steel products contains about 8 percent nickel, compared with the 200-series, which contains about 1 percent, and the 400-series, which contains hardly any. China’s output of nickel-based stainless steel fell 24 percent in February from last year, while output of chromium-based stainless steel rose 71 percent, according to Antaike.

--With assistance from Xiaowei Li in Shanghai. Editors: Matthew Oakley, Richard Dobson.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@Bloomberg.net