China: 304 stainless steel prices seen consolidating higher post-Lunar New Year

• Indonesia nickel curbs tighten cost support
  
  
• March restocking to test upside momentum
  
  

China's 304 stainless steel market is showing early signs of recovery in 2026 after a prolonged downturn in 2025. Post-Lunar New Year sentiment has strengthened, supported by tighter upstream nickel availability, cost pressure, and anticipated seasonal demand recovery.

Technical rebound gains traction

In 2025, stainless steel futures largely traded within RMB 12,400-13,600/t. A decisive reversal emerged in mid-December following Indonesia's reduction in nickel mining quotas (RKAB). Prices broke above the upper range in early January, supported by firm LME nickel trends and improved trading volumes. Although a stronger US dollar triggered a brief correction, futures found support near RMB 13,400/t, signalling underlying strength.

Indonesia supply shock reshapes cost structure

Indonesia set its 2026 nickel ore quota at 260 mnt, down sharply from 379 mnt in 2025. Notably, the world's largest nickel mine saw its allocation cut from 42 mnt to 12 mnt. The move tightened raw material expectations and lifted nickel prices, reinforcing stainless steel cost support.

In China, 304 cold-rolled production costs are estimated at RMB 14,108/t, while spot prices hover at RMB 13,750-13,800/t, indicating negative margins. NPI prices are around RMB 1,055 per nickel unit, and ferrochrome at RMB 8,550 per 50 basis. Sustained losses have prompted mills to cut output, with February crude stainless steel production expected to fall 23% m-o-m to 2.723 mnt.

Outlook

Trading activity may remain moderate through February as the market normalises post-holiday. However, March's traditional peak season is expected to trigger downstream restocking. Supported by production discipline and firm raw material costs, 304 prices are likely to consolidate higher. Policy shifts in Indonesia and the pace of Chinese demand recovery remain key variables.