- Indonesia’s RKAB approvals remain key market driver
- Off-season demand weighs on stainless steel prices
China’s stainless steel market remained under pressure in July as seasonal demand weakness, cautious downstream buying, and macroeconomic uncertainty weighed on prices. However, market participants expect prices to gradually stabilise in August, supported by firm raw material costs, while Indonesia’s nickel ore RKAB approvals remain the key factor influencing market direction.
Chinese stainless steel futures declined during July as weak seasonal demand and shifting expectations around the US Federal Reserve’s monetary policy weighed on market sentiment. Selling pressure pushed futures to a one-month low of around RMB 14,300/t before short covering triggered a modest technical rebound. However, buying interest remained limited amid subdued downstream demand.
Market participants noted that stainless steel prices are currently balancing between firm raw material costs and weak consumption, with August price movements likely to depend on Indonesia’s RKAB approval outcome and broader macroeconomic developments.
July production expected to recover
China’s stainless steel crude steel output from 43 major producers stood at 3.52 million tonnes (mnt) in June, down 7.9% m-o-m but up 6.8% y-o-y.
Production is expected to recover to 3.60 mnt in July, up 2.4% m-o-m and 12.1% y-o-y, driven mainly by higher output of the 200 and 400 series. However, 300-series production is projected to decline by 5.8% from June.
Despite lower visible inventories in some regions, heavy rainfall in southern China and the seasonal slowdown have delayed shipments, resulting in inventory accumulation across major distribution centres. Market participants expect supply pressure to persist as mills resume production following maintenance shutdowns.
Supply reforms offer long-term support
China’s revised steel capacity replacement policy is expected to provide long-term supply discipline by requiring at least 1.5 tonnes of existing capacity to be eliminated for every tonne of new capacity added. The revised framework also brings stainless steel alloy melting facilities under stricter regulatory oversight.
While the policy could gradually phase out inefficient capacity and reduce excessive competition, market participants believe it will have limited impact on near-term supply.
Demand recovery likely ahead of peak season
Demand remained weak across the 200, 300 and 400 series during July, with distributors reporting sluggish enquiries and limited buying interest despite lower prices.
However, market participants expect inventory replenishment to gradually improve during the second half of August as downstream buyers prepare for the traditional September-October consumption season.
In addition, China’s urban redevelopment programme is expected to support medium- to long-term stainless steel demand through increased infrastructure and construction activity.
Indonesia’s RKAB decision remains the biggest uncertainty
The outcome of Indonesia’s supplementary RKAB (Work Plan and Budget) approvals remains the most significant variable for the stainless steel market.
If additional mining quotas exceed market expectations, nickel ore availability could improve, easing raw material tightness and reducing cost support for stainless steel prices. Conversely, limited approvals would keep nickel ore and NPI prices elevated, supporting stainless steel prices despite weak demand. Market participants also noted that even if higher quotas are approved, actual ore supply may increase only gradually due to weather-related mining and transportation disruptions during Indonesia’s rainy season.
Outlook
China’s stainless steel market to remain volatile but relatively stable in August. While seasonal demand is likely to remain subdued in the near term, firm NPI and ferrochrome prices are expected to provide cost support, limiting the downside in stainless steel prices. Indonesia’s RKAB approvals, production levels, and downstream demand recovery will remain the key factors determining market direction.
Note: This article is published as part of a content exchange agreement between SteelDaily and BigMint.
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