In 2008, Taigang Stainless is expected to produce 2.2 million tonnes to 2.4 million tonnes, exerting a considerable effect on the market. Based on the apparent consumption, the surplus stainless capacity will stand at some 900,000tns in 2008 or 1.3 million tonnes in 2009. The excessive capacity is also changing in product mix. With 304 CRC prices falling all the way to CNY 26300pt, many mills have adjusted the production, expanding output of 400 series, starting to make 304J1 and other scarce varieties. It’s even rumoured the mainstream producers have began making 200 series. Under the sluggish market, the lofty inventory at the producers is a threat. By 29 August 2008, CR stainless stocks in Wuxi reported 135,000tns including 74,000tns, up by 4.2% from the week before though HR stocks reduced 1.6% to 61,000tns. Ever since oversupply started last year, the market inventory had peaked at 180,000tns, with some 140,000tns in circulation. Despite increased supply and high-perched inventory, the downstream demand remains quiet, leaving the producers in fierce competition and reshuffle. Based on incomplete data, there are about 20 rolling mills in Jieyang, sourcing the slab and HR resources from Taigang, Baosteel and Jiuquan Steel etc. The rolling mills are yet competitors of the integrated steelmakers, and their profits are further squeezed while HR price is pulled up. Amid the oversupply, the rolling mills can only survive should they keep a complementary relationship with the steelmakers. In Wuxi, 304 2B prevails at CNY 26300pt, while 304 No.1 prevails at CNY 24800 pt, a gap of CNY 1500pt.