It has been a while, and now we are back to our weekly update. Chinese domestic stainless steel market has been bearish for more than one month due to the pandemics and the lasting quarantines. The stainless steel prices of last week mostly dropped though steel mills have tried to boost the prices and trading by announcing to reduce the output in May and June. One of the reasons is that the stainless steel spot inventory keeps increasing because the demand is too tepid. Two weeks ago, the inventory did reduce but the biggest reason is the shutdown of Jiangyin Port which is the major route to Wuxi. As soon as it recovers, last week, the inventory continues to increase. The stainless steel market is facing challenges globally. Not the mention the war, on May 22, India imposes a duty on some steel and ore exports including stainless steel and it takes into effect on the same day, hoping to curb the wild commodity prices and inflation. This undoubtedly gives a strike on many buyers' heads as India is one of the largest exporters in the world. Dheli's action is similar to what Beijing did last year which also happened in May —— the export tax rebate rate on some steel products was reduced to ZERO. If you are happened to experience these two dilemmas, just feel free to tell us your feelings about the volatile stainless steel market. More about the Stainless Steel Market Summary in China from May 16th to May 20th, please keep reading.
 

WEEKLY AVERAGE PRICES

TREND||  Demand remains weak, steel mills fail to raise the prices.

From May 16th to May 20th, the spot price of stainless steel fluctuated to decline. The domestic market continues to be bearish. Influenced by the increase of LME nickel, the futures price stopped decreasing and began to rise. As of May 20th, the most-traded contract of stainless steel futures increased by US$39/MT, to US$3,015/MT. The price difference between spots and futures narrowed down to US$148/MT.
 

300 series of stainless steel: Futures opened to drop and spot prices maintain low.

From May 16th to May 20th, the prices of stainless steel spots remained low. At the beginning of the week, the futures price fluctuated down to hit the bottom. Steel mills opened to reduce the price, Delong and Tsingshan followed suit. It seemed that steel mills and traders become waddling on the road to boost the stainless steel price.  But since the nickel price rose significantly later last week, the stainless steel futures price was raised. As for the spot, the spot price struggled to remain. In Wuxi, the base price of the cold-rolled stainless steel from the private-own mills went down to US$3,060/MT. Until May 20th, the base price of cold-rolled and the hot-rolled 304 dropped by US$30/MT to US$3,090/MT and US$60/MT to US$3,060/MT respectively compared to the prices of May 13th. Transactions were light when the prices were declining but on Friday, with the prices increased, the transaction was activated.
 

200 series of stainless steel: Demand was tepid. The prices intend to drop.

Over last week, the spot price of stainless steel 201 started to decrease and maintain steady. In the gloomy market, the prices of spots intended to go down and transactions were light. Until May 20th, the base price of the cold-rolled mill-edge stainless steel 201 in Wuxi has reduced by US$30/MT to US$1,690/MT; mill-edge stainless steel 201J2 and J5 has dropped by US$38/MT to US$1,585/MT; as for the 5-foot hot-rolled stainless steel, it has declined by US$38/MT to US$1,715/MT.

The transaction of stainless steel 201 was gloomy because the demand was way lower than expected.  Market traders are pessimistic about the future selling prices as the market sentiment has been more passive. Although the actual trading prices were even lower, the orders were not awakened. As we know, on May 20th, the actual dealing price of cold-rolled stainless steel 201J1 was decreased to US$1,570/MT.

400 series stainless steel: More products arrived and transaction was weak.

Last week, the cold-rolled stainless steel 430 maintained steady, at US$1,570/MT. Though the transportation recovered from the pandemic breakout in Jiangyin Port, which benefited the delivery, the inventory volume is still large and causes much pressure on the market. 
 

Summary: 

300 series of stainless steel: In recent days, the nickel price stops decreasing and starts to rise, bringing up the price of stainless steel. However, Chinese demand does not recover, pushing up the inventory in steel mills and the market. The large inventory limits the stainless steel price to increase and it is predicted that the spot price will be fluctuating and move closer to US$3,000/MT.   

200 series of stainless steel: Since 2022, pandemics have arisen in China, and thereby the strict quarantines block the transportation as well as the demand. The stainless steel industry faces the same dilemma and has been taking a beating from January to May.  So far, in China, the demand for stainless steel remains low because the manufacturers reduce the purchase to avoid overstock. As the purchase keeps gloomy, the spot price is forced to go lower. It is predicted that in the short term, the prices will stay feeble and the cold-rolled stainless steel 201J2(coil) will probably stay above US$1,585/MT. 
 
400 series of stainless steel: Logistic recovers and accelerates the delivery, but the inventory is still large. JISCO starts its overhaul, and the output of the stainless steel 400 series and the inventory pressure will be reduced. However, it won’t take effect immediately. It is predicted that in a week or two, the price will maintain stable.
 

INVENTORY|| After a one-week drop, the inventory rises again 

Last week, the inventory volume in the Wuxi sample warehouse increased by 8,500 tons, to 532,700 tons. 200 series inventory rose by 2,100 tons, to 39,000 tons; 300 series increased by 5,900 tons, to 388,200 tons; 400 series increases by 400 tons to 10,550 tons. 

200 series of stainless steel: The port reopens, and the resources flood to Wuxi.

Last week, the inventory of 200 series stainless steel rose by 2,100 tons to 39,000 tons. One reason owes to the reopening of Jiangyin Port which was locked down due to the quarantine. The locked resources were free to enter the market. Another reason is the weak demand and transactions which largely slows down the consumption of the inventory. What’s more, even the shortage of the hot-rolled 5-foot 201J1 is relieved.
 

300 series of stainless steel: Buyers intend to wait because the price is decreasing. 

The recovery of transportation does not awake the demand and meanwhile, the resources are sent to the market. The voice of steel mills’ plan to increase the stainless steel prices is weakened because the demand in China is tepid and the inventory is getting larger.

According to the Shanghai Futures Exchange, until May 18th, the stainless steel futures inventory was 43,700 tons which fell by 40,000 tons compared to the highest in April. After late April, the price difference between spots and futures widens. The settlement of the stainless steel futures contract of May was 22,000 tons which was only half of the settlement of the Contract for April. 

400 series of stainless steel: Prices remain steady.

From May 16th to May 20th, the inventory volume in Wuxi sample warehouse increased by 400 tons to 105,500 tons. The output of 400 series in April rose to 629,500 tons, MoM rose by 29,200 tons, and the rising percentage is 4.86%. In May, because many steel mills have started overhauling, it is predicted that the output of the stainless steel 400 series will reduce.
 

FUTURES||Prices will intend to decline if the pandemics remain. 

Earlier last week, the most-traded contract of ShFE stainless steel futures fluctuated and declined to US$2,925/MT. Influenced by the nickel price increase, the futures price of stainless steel went up to US$3,000/MT and fell slightly.

The increase in the stainless steel futures last week was rooted in the rising production cost. Although steel mills strive to make a breakthrough on the raw material cost side and enlarge the input by purchasing stainless steel scrap, the effect is minor. The cost stays high but the price of stainless steel can’t go any higher because of the sluggish market and demand due to the pandemics. Restricted by the quarantines and inactive commercial events, the social inventory of stainless steel maintains at a high level. To reduce the inventory, some steel mills have to reduce the price of their futures orders. The stainless steel futures are still weak and unstable. To consume and reduce the inventory is a major purpose. But if the pandemics worsen, the price will move down.

Since February this year, the pandemics have caused great damage to China’s economy. In a macro view, undoubtedly the government will upscale the investment in an economic recovery but it won’t affect the increase of prices of futures and spots in the short term. It may only work in maintaining the prices at current states. From a longer perspective, only when the pandemic sets no boundary in people’s life and commercial trades, can the demand and consumption recover.    

In a word, the increasing nickel price raised the stainless steel futures price but as long as the demand is weak and the inventory is high, the market will remain gloomy. However, the prices can hardly drop greatly because the raw materials are expensive and the government keeps boosting the market.

FOCUS|| India imposes tax on steel export to cool prices.

Hoping curb inflation and keep domestic steel prices in check, the Indian government over the weekend raised an export tax on iron ore, imposed a new export tax on a number of steel products including stainless steel and meanwhile reduce an import tax on certain raw material imports to zero. The new duty regime has come into effect as of the night of May 22 as soon as the decision was announced, according to a government notification.

Europe, Vietnam and the Middle East were the three largest destinations for Indian steel exports, together accounting for around 50% of India’s overall steel exports, including semis.

The export taxes on steel were a part of a series of changes to taxes on crucial commodities aimed at reining in retail inflation, which has jumped to an eight-year high. 

Following the ministry's announcement was made with an eye on the 2024 national elections, since a staggering increase in steel input costs since 2020 left several infrastructure projects unviable, the increase in real estate and automobile prices as well as heightening inflation, sources said.

"The objective of the government is to curb inflation and not to stop steel exports," a Mumbai-based exporter said. "As they get lot of foreign exchange revenue from steel exports."

Platts assessed domestic HRC delivered Mumbai at Rupees 69,000/mt at the Asian close May 20, 76.9% higher from Rupees 39,000/mt ($502) on Feb. 5, 2020, data by S&P Global showed. In contrast, Platts had assessed Chinese HRC ex-stock Shanghai 34.8% higher from Yuan 3,590/mt on Feb. 5, 2020 to Yuan 4,840/mt on May 20. With this revision, market sources unanimously expect domestic prices to fall substantially.

Metal stocks plunged in the morning trade on May 23 as brokerages downgraded the sector after the government imposed export duties on iron ore and some steel intermediaries.

Jindal Steel & Power fell 15 percent, the most since January 2008, Tata Steel was down 12 percent, the biggest drop since August 2015, JSW Steel 11 percent, its highest loss since May 2020 and SAIL was down 11 percent, the lowest it has been since May 2020.

Indian export duty on the steel products immediately reminds us of China’s cancellation of the export rebate rate last year in May (Related Article). Similarly, the two announcements leave almost no buffer time. In China, the action took into effect two days later while India brought it out in the same day. The two countries have the same major purpose, to knock down the commodities inflation and cool down the market.