South Korea's only nickel refinery, Korea Nickel Corp, will produce 27 percent less of the metal than planned this year due to a 6-1/2-month shutdown of its main furnace, an industry source said on Monday.
But he said the unexpected fall in output - the result of a refractory brick problem in the furnace - was unlikely to affect supplies to Korea Nickel's main customer, steel-maker POSCO.
"Korea Nickel's output this year is expected to fall by 10,000 tonnes to about 27,000 tonnes from its earlier target," the source close to the company told Reuters.
"The company is shutting down its main refinery from June through mid-December," the source said, adding it had switched on its smaller, stand-by refinery instead.
Korea Nickel officials declined to comment.
The company imports all of its nickel oxide sinter, an intermediate product containing 75 to 76 percent pure nickel, from Canada's Inco Ltd and produces refined nickel for sale mainly in the domestic market.
Korea Nickel's main furnace had annual design capacity of 32,000 tonnes, he said, but the company had aimed to squeeze out 35,000 to 37,000 tonnes in 2004.
Last year it produced 31,000 tonnes of nickel, which is used to add strength and sheen to stainless steel.
Korea Nickel's second refinery had annual capacity of 16,500 tonnes, he said, but had not been operating prior to the closure of the larger furnace.
Tight raw material supply has been the main reason for Korea Nickel's below-capacity production in recent years.
Nickel for three-month delivery on the benchmark London Metal Exchange (LME) hit a 15-year high of $17,250 a tonne in January.
It closed at $15,150 a tonne on Friday, around 80 percent higher than a year ago, with global inventory concerns high in investors' minds.
Nickel stocks in LME-registered warehouses stood at 8,310 tonnes, compared to around 24,000 a year ago.
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