- July crude stainless steel output projected to rise 2.4% m-o-m and 12.1% y-o-y
- Nickel pig iron and ferro chrome prices decline, lessens production cost support
China’s stainless steel market is expected to remain under pressure in July as declining raw material prices and weaker seasonal demand continue to weigh on market sentiment. While production is scheduled to increase, downstream procurement remains subdued, creating persistent supply-demand imbalance. Softer prices for key raw materials, including high-grade nickel pig iron (NPI) and high-carbon ferrochrome, have reduced cost support for stainless steel producers, while demand from construction, real estate and consumer goods sectors has weakened further during the traditional summer off-season.
On the raw material front, prices of high-grade NPI and high-carbon ferrochrome declined during July. High-grade NPI purchase prices from major Chinese stainless steel mills were reduced to around RMB 1,120/mtu for August deliveries, while the market index eased to around RMB 1,140/mtu. At the same time, major mills lowered July high-carbon ferrochrome procurement prices by approximately RMB 200/t, with domestic market prices falling to RMB 8,050-8,150/t (50% Cr basis). Although Indonesia continues to maintain a disciplined approach toward nickel ore production quotas by approving additional mining volumes selectively, the decline in downstream stainless steel prices has outweighed concerns over raw material availability, weakening overall cost support.
Supply conditions remain elevated despite a modest decline in June production. According to MySteel, crude stainless steel production from 43 Chinese mills totalled 3.515 million tonnes (mnt) in June, down 7.9% m-o-m but up 6.8% y-o-y. Production is expected to rebound to 3.600 mnt in July, increasing 2.4% m-o-m and 12.1% y-o-y. While planned production of 300-series stainless steel is projected to decline by 5.8% from June levels, output of 200-series and 400-series grades is expected to rise by 18.4% and 5.6%, respectively, keeping overall market supply at historically high levels.
Demand fundamentals remain weak as China enters the seasonal summer slowdown. Construction activity has moderated due to high temperatures, while the property sector continues to face subdued new project launches. Purchasing activity from home appliance, kitchenware, sanitary ware and metal processing industries remains largely need-based, with buyers avoiding inventory accumulation. Although demand from emerging sectors such as solar energy and new energy vehicles continues to support consumption of certain 300-series stainless steel grades, it remains insufficient to offset weaker demand from traditional end-use sectors.
Export opportunities also remain constrained. Market participants continue to face pressure from overseas trade barriers, including the European Union’s Carbon Border Adjustment Mechanism (CBAM) and anti-dumping measures in several export destinations. As a result, distributors have continued lowering prices to reduce inventories and improve cash flow, contributing to increased availability of competitively priced material in the domestic market.
Inventory levels have eased only marginally. As of 9 July, total stainless steel inventories across 89 major warehouses stood at 1.123 mnt, down 0.6% w-o-w. Cold-rolled inventories declined by 1.0% to 647,800 t, while hot-rolled inventories slipped 0.1% to 475,500 t. Despite the weekly decline, inventory drawdowns remain slow, reflecting subdued underlying consumption and the risk of renewed stock accumulation if production continues to outpace demand.
Outlook
China’s stainless steel market is expected to remain under pressure through July as softer raw material costs, elevated production and seasonally weak downstream demand continue to weigh on prices. Market direction during August will largely depend on any adjustments to Chinese mill production, developments in Indonesia’s nickel ore supply policy and the pace of downstream restocking ahead of the traditional September demand recovery.
Note: This article is published as part of a content exchange agreement between SteelDaily and BigMint.
Leave a Reply