Finally, we are here in the last month of 2021. About the stainless steel market summary in China for last week, not many things were changed. At least, the major tendency of the stainless steel market remains. Almost the prices of all grades of stainless steel keep decreasing, though the inventory is reducing. The exception is the 5-foot hot-rolled stainless steel 201J1. Only this product increases in price for it is out of stock and a steel mill announced that the production of stainless steel 201 is ceased in December, which worsens the out-of-stock situation of 200 series of stainless steel. Some of you might feel confucious about the current stainless steel market in China—— Why don't steel mills stop producing when the supply is now over demand and the selling prices can't cover the production cost? Just keep rolling, to find out the answer.
Stainless steel average prices of last week
| Grade | Origin | Market | Average Price (US$/MT) | Price Difference (US$/MT) | Percentage (%) |
| 304/2B | ZPSS | Wuxi | 3,170 | -111 | -3.54% |
| Foshan | 3,215 | -111 | -3.49% | ||
| Hongwang | Wuxi | 2,950 | -127 | -4.32% | |
| Foshan | 2,940 | -127 | -4.33% | ||
| 304/NO.1 | ESS | Wuxi | 2,890 | -127 | -4.42% |
| Foshan | 2,935 | -105 | -3.61% | ||
| 316L/2B | TISCO | Wuxi | 4,545 | -108 | -2.10% |
| Foshan | 4,585 | -117 | -2.58% | ||
| 316L/NO.1 | ESS | Wuxi | 4,320 | -114 | -2.67% |
| Foshan | 4,365 | -114 | -2.64% | ||
| 201J1/2B | Hongwang | Wuxi | 1,860 | -76 | -4.21% |
| Foshan | 1,845 | -70 | -3.91% | ||
| J5/2B | Hongwang | Wuxi | 1,740 | -84 | -4.96% |
| Foshan | 1,755 | -68 | -4.02% | ||
| 430/2B | TISCO | Wuxi | 1,665 | -46 | -2.91% |
| Foshan | 1,660 | -51 | -3.21% |
Trend|| Stainless steel prices keep reducing.
Last week, the stainless steel prices continue to drop. Steel mills canceled the lowest price. People hoped to increase the trading volume by reducing the price. But the buyers are not keen on purchasing because there doesn’t seem that the stainless steel prices stop decreasing. Until December 3rd last Friday, the main contract of the stainless steel futures reduces by US$485/MT, to US$2,815/MT. Since the price of spot products dropped significantly, the price difference between spot and futures reduced to US$80/MT. Last Friday, the stainless steel warehouse receipt volume in Shanghai Futures Exchange was 2,421 tons which is 677 tons less compared to November 26th, hitting a record low after the latest settlement.
300 series of stainless steel: The prices of spot products keep declining though the raw material cost remains.
The spot prices of stainless steel 304 fell significantly last week. The cold-rolled stainless steel 304 of the private-owned mills in Wuxi market was reduced by US$206/MT, down to US$2,820/MT. Not only did the spot prices drop, but the guidance prices of steel mills also went all the way down. Tsingshan and Delong reduced the prices to boost the sale. But the fact was not to be. The hot-rolled stainless steel market is also pathetic. The hot-rolled stainless steel 304 dropped by US$215/MT to US$2,790/MT. On December 2nd, Tsingshan announced that his control on prices are left in the coil. As for the sheet product, Tsingshan allows lower prices to sell. On December 3rd, the price of cold-rolled and hot-rolled stainless steel decreased by US$63/MT.
From the perspective of raw material, the EXW price of high nickel iron remained at US$232/nickel as a week before, and ferrochrome was quoted at US$1,495/50 base tons. Theoretically, the production cost of cold-rolling stainless steel 304 was US$2,899/MT. Based on the current domestic selling price, steel mills are now in a serious profit deficit per ton. As for the scrap production, the scrap of stainless steel 304 in Foshan market is around US$2,000/MT, and the production cost by using scrap is about US$2,784/MT. By scrap production, the deficit is US$100/MT and by the metallurgy production, the deficit is about US$217/MT.
200 series of stainless steel: The trading volume of hot-rolled stainless steel warmed up while cold-rolled stainless steel kept declining.
After Tsingshan took back the limit in price on December 4th, traders followed the trend to minimize the loss. Since the trade of hot-rolled stainless steel has remained stable, the inventory reduced quickly. The inventory fell by 2,800 tons last week. Not until December 1st, the trading volume of hot-rolled stainless steel heat up because a steel mill announced that the production of hot-rolled 5-foot stainless steel 201 to be stopped in December. Some of the hot-rolled 5-foot stainless steel has been out of stock, so those who have enough stock of the products are now beneficial. However, the price of cold-rolled stainless steel decreased by US$95/MT~US$119/MT and the transaction did not turn better.
400 series: Production limit returns to the raw material factories.
Last week, the high chrome factories in Shanxi are required to reduce 50% of the productivity. Some factories stop the submerged arc furnaces to reduce the high chrome production. Fortunately, the supply of high chrome remains sufficient fortunately because other production areas remain normal.
Summary:
The main contract of stainless steel futures fluctuated to decrease last week. Influenced by the decreasing prices of the spot products, the stock market failed to increase. The stainless steel market is extremely gloomy.
The spot price of stainless steel keeps decreasing, resulting in a smaller price difference between spot and futures. At the current stage, the demand for stainless steel is far lower than the supply. Therefore, it is of large possibility that the stock prices will keep decreasing.
Reasons leading to the continuous drop are:
1. From the perspective of supply, the production volume in November increases a lot compared to the previous months. In December, the production will remain high because steel mills have to complete their production goal at the end of the year.
2. From the demand side, for now, the market is in the slack season, and the transaction has been light. Moreover, the prices keep decreasing, which depresses buyers' purchasing willingness. The stock-up behavior can hardly repeat under the negative trend.
3. Due to the continuous declining prices of stainless steel, steel mills face low profit and even deficit, which pushes them to explore larger profit margins in the raw material supply side. Steel mills have to lower the production cost. Influenced by the sluggish market, raw materials like ferronickel and ferrochrome decline in prices, which actually provides room for the stainless steel prices to decrease and postpone buyers’ purchase timing.
In a short term, the contradiction between the supply and demand of stainless steel will be intensified. It is predicted that the stock prices will go down, and the futures of January 2022 will fall at US$2,675/MT~US$2,835/MT.
300 series of stainless steel:
The production of steel mills remains. Due to the inactive demand, the private-owned mills have to lower the prices to stimulate the purchase. However, the raw material cost remains. It is predicted that the base prices of the private-owned mills will keep falling, to US$2,775/MT.
200 series of stainless steel:
Something different is happening in the 200 series stainless steel market. The prices fluctuated last week because Tsingshan stopped limiting the bottom price, another steel mill announced that hot-rolled stainless steel 201 is to be suspense, and steel mills reduced the opening prices. The price of cold-rolled stainless steel continued to decrease while the hot-rolled stainless steel stopped declining. Typically, the 5-foot hot-rolled stainless steel will increase since it is out of stock. However, the cold-rolled stainless steel will keep decreasing.
400 series of stainless steel:
In Wuxi market, the trading price of stainless steel 430/2B by JISCO and TISCO was around US$1,610/MT~US$1,620/MT, which has been lower than the production cost. The price of 430/2B can hardly decrease. It is predicted that the price of stainless steel 430/2B will be stable, remaining as last week.
Black horse: 5-foot hot-rolled stainless steel 201J1
The stainless steel market has remained decreasing in prices for more than one month. Last week, only the price of 5-foot hot-rolled stainless steel 201J1 did not follow the falling trend. The quotation remains at about US$1,585/MT. It is considered as a highlight of last week among all the decreasing prices and the behind reasons are:
1. Out of stock.
Two weeks ago, there has sort of things going around in the market. The shortage of thickness of 3.0 mm~ 5.0 mm is severe. Products of these thicknesses are increasing in price.
2. A steel mill ceased production.
Due to the low profit, a steel mill announced that the production of 5-foot hot-rolled stainless steel 201 will be turned off in December.
3. The trading warmed up.
Thanks to the two reasons mentioned above, the transaction slightly warmed up. The supply will be less and the products will be rare. Thereby, the price of this specification increases.
Inventory|| Though the inventory is reducing, the prices still remain dropping.
The total volume of the Wuxi sample warehouse decreases by 17,600 tons, to 423,200 tons. The inventory of 200 series of stainless steel reduces by 2,800 tons, to 36,900 tons; 300 series of stainless steel down by 11,700 tons, to 292,000 tons; 400 series of stainless steel decreases by 3,200 tons to 94,200 tons.
| Inventory in Wuxi sample warehouse (Unit: thousand tons) | 200 series | 300 series | 400 series | Total |
| November 29th ~ December 3rd | 36.9 | 292.0 | 94.2 | 423.2 |
| November 22th ~ November 26th | 39.7 | 303.7 | 97.4 | 440.8 |
| Difference | -2.8 | -11.7 | -3.2 | -17.6 |
200 series of stainless steel: Transaction heats up, inventory decreases slightly.
Last week, Beigang New Materials, Baosteel Desheng, ANsteel LISCO delivered cold-rolled and hot-rolled stainless steel 201 to the market. Thanks to the surprisingly better transaction of 5-foot hot-rolled stainless steel 201, the inventory dropped. Besides, compared to other specifications, the materials with a thickness of 3.0mm~5.0mm are short in inventory, and the prices increased by US$65/MT~US$320/MT according to different specifications.
300 series of stainless steel: The hot-rolled stainless steel reduces the most.
Last month, a steel mill in Eastern China ceased the production of hot-rolled stainless steel 304 and began to produce stainless steel 201. The raw material cost increased in November, but the price of the stainless steel 300 series keeps decreasing. The profit earned by steel mills was largely cut down. Some steel mills reduced the productivity of the stainless steel 300 series and turned to the more profitable stainless steel 200 series or 400 series. In November, Guangqing recovered from the production limit and started to produce. However, the products did not enter Wuxi market but were left in the warehouses of steel mills. Recently, the steel mill in Eastern China sends more products to Foshan market rather than Wuxi market.
400 series of stainless steel: Agents of steel mills pick up products.
The decrease of the inventory of stainless steel 400 series mostly came from the reduction of the state-owned steel mills, because the agents are required to complete the monthly quota. The prices of the stainless steel 300 series dropped significantly. Some steel mills switch the production of 300 series to 400 series. It is predicted that the inventory of stainless steel 400 series will increase.
Raw material|| Facing profit deficit, why do steel mills keep producing?
The stainless steel prices of all grades fell significantly in recent days, but there is no sign indicating that steel mills will reduce production.
From the perspective of the stainless steel production cost, both production methods by metallurgy and scrap are no longer lower than the current low prices of stainless steel. On December 3rd, the price of high nickel iron was US$232/MT, high carbon ferrochrome was US$1,492/50 base tons, the metallurgy producing cost of cold-rolled stainless steel 304 was US$2,899/MT. The quotation of stainless steel 304 on the same day was US$2,000/MT, while the scrap production cost was US$2,784/MT. In our last report (November 15th ~ November 19th), the scrap production could still have some profit to earn, but now, the stainless steel prices are too low to cover the production cost.
Although we have mentioned that steel mills push the raw material side to reduce the cost, it is believed that the cost of raw materials won’t reduce in a short time. The ferronickel imported from Indonesia dropped in October. The nickel ore export of the Philippines also decreases due to the rainy season. The high nickel iron will remain at the current price for a while. As for the stainless steel scrap market, because the metal scrap was more beneficial in producing, the consumption increased greatly and the inventory reduced. Besides, the metal scrap will be tightened up in winter. In a short term, the scrap price will maintain stability.
For now, the cost can hardly reduce, while the stainless steel prices keep decreasing. Meanwhile, the production of steel mills is enlarging. The output of stainless steel crude steel in November has already surpassed that of October. It is predicted that the production of December will remain as November. Merchants never do the business at a loss. Actually, steel mills are now preparing for the production of 2022. In 2021, most of the steel mills have earned enough earlier in the year. Some steel mills have earned more compared to the same period of last year. Some steel mills have a concern if there is a “production policy” in the next year, which requires the production of steel mills in the year can not surpass that in the previous year. Therefore, although it seems unreasonable that steel mills are producing at a loss, to protect the interest in 2022, the increasing production is understandable.