By FN Arena

Despite all time high nickel prices China is set to continue to expand its stainless steel production capacity at a rate of 25% per year up to 2009, analysts at Citigroup say.

This, the analysts say, is great news for overseas nickel producers because two thirds of primary nickel demand is used for stainless steel products and China 's domestic supply is falling way short of meeting demand.

Another positive for the nickel industry is the lack of substitution that has been prompted by the spike in prices.

Although concerns have been raised over the sustainability of Chinese industrial activity, including nickel demand, the analysts are of the view that the global economic outlook remains supportive, despite rising interest rates and that China 's industrial production should continue to rise by around 15% per year for the next few years.