Baosteel Stainless could stop buying high-grade nickel pig iron this month following the rapid decline in refined nickel prices.

"Baosteel Stainless will not offer a bidding price for high-grade nickel pig iron in October, as refined nickel prices are low," a market source said.

When asked, a Baosteel official said that this was "likely".

"Our nickel pig iron stocks are still high," he said.

The major Chinese stainless steel producer had started to cut its use of nickel pig iron in late July, returning to refined nickel as the price of the raw material fell.

Before that, as much as 50% of Baosteel's raw material for the production of 300 series stainless steel came from nickel pig iron.

Other stainless mills are still buying nickel pig iron but the volume purchased is expected to drop in October.

China's largest, Shanxi Taigang Stainless Steel, is offering 1,630 yuan ($255) per nickel unit for October delivery of 10-15% nickel pig iron.

Guangzhou Lianzhong Stainless Steel is also offering for October delivery at 1,600 yuan per nickel unit, with Zhangjiagang Posco looking for very small volumes at 1,550 yuan.

Baosteel Stainless last offered 1,620 yuan per nickel unit for September.

Spot nickel pig iron prices have fallen after the week-long national holiday at the start of October, but remain higher than refined nickel prices.

Producers are offering 10-15% nickel pig iron at 1,500-1,530 yuan per nickel unit this week, down from 1,580-1,600 yuan at end September, although supply remains tight.

"Nickel pig iron producers are not willing to sell a lot at the current price level," an analyst in Shanghai said.

Spot nickel prices last settled at 139,500-140,500 yuan per tonne on the Shanghai Changjiang Nonferrous Metals Market on Wednesday.

Nickel ore prices have also softened, as nickel pig iron prices fall.

High-grade nickel ore of grade 1.8-1.9% is selling at 710-780 yuan per tonne at Chinese ports, down from 720-800 yuan before the holiday.

Nickel pig iron producers in Inner Mongolia tend to start stocking up on nickel ore for the winter but this will only support demand in the northern ports. Overall, trading volumes of nickel ore at Chinese ports remain weak.

"In southern ports such as Lianyungang, supply pressure is very high and buyers are trying to pull down prices," a nickel ore importer in Shanghai said.