SHANGHAI, Sep 7 (SMM) - Although domestic macro favourable policies were successively introduced in August, the continuous surge in the U.S. dollar index and the sluggish stainless steel consumption caused stainless steel futures prices to fluctuate sideways. On August 19, the prices dropped to 15,105 yuan/mt, the lowest point since May 27, 2021, down 0.73% on the month.
The average price of 304/2B stainless steel with burr edge in Wuxi kept falling in August, and stood at 16,050 yuan/mt as of August 31, down nearly 28.7% from the annual high.
Supply and demand
On the supply side, steel mills further expanded the production reduction in August. In particular, the total output of the 400-series decreased significantly due to severe losses. On the demand side, despite the introduction of multiple favourable macro policies, the major terminal sectors such as real estate, automobiles, and construction machinery remained sluggish.
Due to poor terminal demand and extremely high temperatures, processing plants in Wuxi began to reduce or halt the production in the first half of August, putting off the delivery date with potential negative impacts. As staggered power consumption was required in various districts of Wuxi city, processing plants failed to deliver the orders in time, thus some of them chose to commission the steel coils processing to other power-restriction-free area. On the whole, the high-temperature induced power rationing in early August had a relatively huge impact on the downstream stainless steel processing plants, thus it was difficult for the stainless steel demand to be transmitted to the terminal enterprises in the short term. While the temperature dropped in late August, the operating rates of processing plants gradually improved.
In August, as the spot prices stopped falling and stabilised, downstream demand slightly picked up. At the same time, the delivery of steel mills to the market was affect by typhoon in late August, and the total amount of Indonesian stainless steel arrivals in China was restricted due to strict customs inspection. Overall, the social inventory of stainless steel declined, and the destocking was slightly faster than that in July mainly due to supply-demand imbalance. In September, most steel mills are expected to resume the production, and the flow of stainless steel from Indonesia back to China is predicted to return to a normal level. Meanwhile, the orders are likely to increase with the expectation for a peak season, so the social inventory in Wuxi and Foshan will maintain its decline speed of August.
In September, the supply is estimated to add slightly. As most private steel mills plan to maintain their production flat from August, the increase in production mainly comes from large steel mills and those with newly added capacity.
In terms of imports, it is expected that the domestic inflow of Indonesian stainless steel will decrease in September. The demand for stainless steel is likely to grow in September as the domestic market is expected to see a recovery in demand. In addition, given that some large steel mills in Europe have suspended or cut the production, it is expected that China's stainless steel exports may increase in September. The cost support is relatively strong, and the prices of NPI are falling slower with the potential to stabilise. Ferrochrome plants have cut the production due to severe losses, and are firm to the prices and reluctant to sell, leading to a slight increase in ferrochrome prices. The scrap prices are also resilient amid short supply. To sum up, it is expected that stainless steel prices have room to rise in September.