Stainless Steel Market Summary in China || Demand is desperately longed to recover; sea freight continues to turn down (Feb 20 ~ Feb 24)

01 Mar 2023

Same old topic. The demand remains sluggish. The stainless steel prices of last week struggled to remain unchanged. The spot inventory remains large, stressing the market out. However, on the raw material side, the high production cost supports the stainless steel prices to hold. It is a dilemma that the steel mills are facing. They have told the market for a long that they will reduce the output to resist this muddy situation. Suffering from the tepid global demand, the shipping industry also faces a tricky state quo that is contradictory to its brilliance two years ago. It is ironic to think that back to the worst pandemic disruptions, some of our overseas buyers had paid as much as over US$20,000 to move a container (FEU) of goods and it was in September 2021. Keep going for our Stainless Steel Market Summary in China, please roll down for more details.

WEEKLY AVERAGE PRICES

**Weekly Average Prices (Updated on February 24th)**
Grade	Origin	Market	Average Price (US$/MT)	Price Difference (US$/MT)	Percentage (%)
304/2B	ZPSS	Wuxi	2,690	-9	-0.34%
	ZPSS	Foshan	2,724	-9	-0.33%
	Hongwang	Wuxi	2,610	1	0.06%
	Hongwang	Foshan	2,610	13	0.53%
304/NO.1	ESS	Wuxi	2,560	-9	-0.36%
304/NO.1	ESS	Foshan	2,575	1	0.06%
316L/2B	TISCO	Wuxi	5,045	-64	-1.29%
316L/2B	TISCO	Foshan	5,125	-58	-1.16%
316L/NO.1	ESS	Wuxi	4,855	-64	-1.34%
316L/NO.1	ESS	Foshan	4,855	-35	-0.73%
201J1/2B	Hongwang	Wuxi	1,570	-6	-0.40%
201J1/2B	Hongwang	Foshan	1,545	-1	-0.10%
J5/2B	Hongwang	Wuxi	1,470	-3	-0.22%
J5/2B	Hongwang	Foshan	1,480	1	0.11%
430/2B	TISCO	Wuxi	1,360	-15	-1.16%
430/2B	TISCO	Foshan	1,355	-15	-1.16%

TREND|| Dispense is now turning down, demand is desperately longed to recover.

The price trend of the stainless-steel series were varies last week: stainless steel 201 was in a “Goldilocks situation” while 304 and 430 rallied. The most traded contract rose by US$28 to US$2565/MT.

Stainless steel 300 series: Demand reignited, but only just for a second.

The price trend of the stainless steel 300 series fluctuated. The cold-rolled 4-foot mill-edge stainless steel 304 and hot-rolled stainless steel 304 quoted at US$2560/MT, remained unchanged.

Delong had escalated their supply cuts last week, at least 60% of cold-rolled and hot-rolled resources were shrinking in the distribution. For a time being, the market transaction was ignited by the spiking future price in the first half of last week, but then it was proven a flash in the pan.

Stainless steel 200 series: It’s easier to stack than done.

Until 24th February, the most traded base price of cold-rolled stainless steel 201 remain unchanged from the previous quote at US$1540/MT, the hot-rolled 5-foot stainless steel also stayed flat at US$1495/MT. The most traded base price of stainless steel 201J2 rose US$7 to US$1445/MT.

The spot price of the 200 series remains stable as the market heated up, the price J2/J5 hover between US$1435/MT-US$1445/MT. The inventory was keep lifting with a 4% of increment.

Stainless steel 400: Inventory was still going up

Both guidance prices of Stainless steel 430/2B landed on US$1500/MT, but TISCO quoted US$7 less than the week before and JISCO quoted US$15 more.

Baoxin (Ningbo) announced the EXW price of cold-rolled stainless steel products in March:
Cold-rolled stainless steel 430: US$1680/MT, a US$29 raise.
Cold-rolled stainless steel 304: Orders negotiated separately

Meanwhile, the quoted price of stainless steel 430/2B in the Wuxi market fell US$15 to US$1370/MT.

Summary:

The price level of stainless steel so far is a bit “unrealistic”, and it is longing for the full recovery of the downstream demand.

Stainless Steel Series 300:

The inventory is still considered as high as there is a large availability of spot goods in the warehouse, with the price currently rallying above US$2530/MT. In the mid(long)-term, the oversupply can be ended as the amount of supply is under control.

Stainless Steel Series 200:

The market had once warmed up for a bit the early last week, but then turned weak on Wednesday. It is obvious that the stockage was in surplus until last week, and low demand is unlikely to be worn off for the time being.

Stainless Steel Series 400:

Market transaction performed just like any other stainless-steel series, underselling is not a preferred choice for the manufacturers given the circumstance of the peaked production cost.

Inventory|| A record was broken, and yet another record to break.

The inventory level at the Wuxi sample warehouse rose by 20,068 tons to 669,787 tons (as of 23rd February).

Inventory in Wuxi sample warehouse (Unit: tons)	200 series	300 series	400 series	Total
February 15th	46,060	511,029	92,630	649,719
February 23rd	48,060	527,777	93,950	669,787
Difference	2,000	16,748	1,320	20,068

the breakdown is as followed:
200 series: 2,000 tons up to 48,060 tons
300 Series: 16,748 tons up to 527,777 tons
400 series: 1,320 tons up to 93,950 tons

Stainless steel 300 series: Another week of lifting

The increment was mainly made up of the resources in the preposition warehouse. The cold-rolled resources. Market arrivals have been coming in one after another this week, but the performance of market outflows during the inventory period has been poor. In the previous period when prices were depressed, warehouse receipts were traded more favourably than spot goods, resulting in a significant increase in cold-rolled spot inventory. It is reported that due to shipment pressure and environmental inspections, the five-stand and pickling lines at the Xiangshui Base of Jiangsu Steel Plant stopped production on February 22 and are expected to remain closed until the end of this month, which may affect 20,000 tons of cold-rolled production.

Stainless steel 200 series: Inventory hiked for ten weeks in a row

The market turned warmer last week, with transaction volume increasing slightly and overall shipment volume also increasing slightly during the week. The tenth consecutive increase in inventory was mainly reflected in the cold-rolled inventory of some large buyers in individual markets. Transactions weakened last Wednesday and spot inventory accumulated, again. The inventory level of the 200 series currently is high and weak downstream demand makes it difficult for prices to rise.

Stainless steel 400 series: Slight increase in inventory

The transaction last week was rather lacklustre as the retail price fell along with the price of raw materials. The price of the 400 series is very likely to remain steady at the current level in the short term, and the inventory would take a longer time to digest.

RAW Material|| Steel mills grasped the bargaining power in the tendering-base purchase.

Nickel: The price of ferronickel fell along with the purchasing price

The price of low-grade ferronickel (1.6%-1.8%) was quoted at US$870/MT.

ShFE nickel fell after growth last week, closing at US$29,450/MT with a 453/MT(1.53%) decrease.

The raw material purchase is now underway, some steel mills in eastern China offered the buying price of high-grade NPI from US$305/mtu-US$310/mtu, including the delivery and the VAT, the price may vary from the shipping destination.

Steel mills are still in a state of loss despite there being a slight downturn in the price of raw materials, it could be a leverage for the steel mills in the negotiation of the purchase price. Thus, the price trend of ferronickel is projected to be weak in the short term.

The replication of Indonesia's Export nickel tax has begun to brew in the Philippines.

In terms of market impact, a tax from the Philippines would add support to the nickel price, albeit to a lesser extent. It would also tighten nickel supply for the foreseeable future, thus increasing production costs for downstream industries. However, it is likely more of a medium- or long-term threat. Any such plans would require both approval and implementation before markets see any impact.

Moreover, should the Philippines attract the investments it seeks, it could take years for such industries to become operational. And should global economic pressures see demand for nickel drop, it could offset the potential impact. However, those pressures could also test the country’s resolve to continue the tax or ban. China would feel the brunt of the effects should the Philippines go forward with the policy, followed by Japan. China currently accounts for around 90% of the Philippines’ nickel exports.

It is worth noting that such considerations have come with strong opposition, which could still derail the government’s plans. In fact, the largest critics of the move include the Philippines’ own mining sector. President of the Philippine Nickel Industry and Global Ferronickel Holdings Inc., Dante Bravo, recently told Reuters, “the initial proposal in the House of Representatives was 10%. That will kill the industry.”

Other critics have noted the flawed comparison between Indonesia and the Philippines. While Indonesia accounts for 48% of global supply, the Philippines accounts for just 11%. This gives Indonesia considerably more leverage in the market. According to the U.S. Geological Survey (USGS), the Philippines was the second largest producer in 2022. Still, its output sat markedly beneath that of Indonesia.

Estimates have Indonesia producing 1,600,000 tons of nickel in 2022. In the same year, the Philippines produced just 330,000 tons. Moreover, the ore supplied by the Philippines is reportedly lower quality than that sourced from Indonesia. The Philippines sits at an even greater disadvantage considering its reserves. While it remains the second largest global supplier, the Philippines holds only the 6th largest reserves. This fact alone could cause hesitation among potential investors.

Chrome: The high production cost supports the limited decline of steel recruitment prices.

The most traded EXW price of high chrome floated between US$1430-US$1460/MT(50% chromium), which is slightly higher than the tendering-base purchase price of February: US$1420-US$1450/MT(VAT and cash price).

The price of chrome ore had a roller coaster ride throughout February. As of 24th February, the spot price of Chrome Crude Ore South African (Cr2O3 40-42%), remained steady at US$8/MT; Chrome Lump Turkey (Cr2O3 40-42%) quoted US$9/MT. The price trend might look flat, but the production cost of high chrome overall in February had lifted.

Swaying by the high production cost, the high chrome producers are not likely to largely rise their production volume from the current level in a short term.

SEA FREIGHT|| Freight rate continues to head down.

Freight rates overall on multiple sea routes continued to dip last week. 24th February, the Shanghai Containerized Freight Index was downed by 2.9% to 946.68.

Europe/ Mediterranean: The S&P Global Eurozone Manufacturing PMI fell to 48.5 in February of 2023 from 48.8 in January, missing estimates of 49.3 to mark the eighth consecutive contraction of the bloc’s factory activity. Until 24th February, the freight rate (maritime and marine surcharge) exported from Shanghai Port to the European major ports was US$882/TEU, an 3.1% decrease. The freight rate (shipping and shipping surcharges) for exports from Shanghai Port to the Mediterranean major ports market was US$1605/TEU, down by 1.7%.

North America: The demand is recovering but slower than expected. Until 24th February, the freight rates (shipping and shipping surcharges) for exports from Shanghai Port to the US West and US East major ports were US$1,234/FEU and US$2,391/FEU, 3.1% and 4.2% fall accordingly.

The Persian Gulf and the Red Sea: Until 24th February, the freight rate (maritime and marine surcharges) exported from Shanghai Port to the major ports of the Persian Gulf had a 4.6% fall from last week's posted US$1079/TEU.

Australia/ New Zealand: Until 24th February, the freight rate (shipping and shipping surcharges) for exports from Shanghai Port to the major ports of Australia and New Zealand was US$346/TEU, which was downed by 6.2% from the previous week.

South America: The supply-demand in the freight market is now balanced, On 24th February, the freight rate (shipping and shipping surcharges) for exports from Shanghai Port to South American major ports was US$1507/TEU, only one dollar drop from the previous week.