China: Stainless steel prices likely to remain range-bound despite production cuts

• Weak demand continues to weigh on market sentiment
  
  
• Firm NPI costs provide support to production costs
  
  

MYSTEEL: China's stainless steel market is expected to remain range-bound in the near term, as weak downstream demand and macroeconomic uncertainty continue to offset support from production cuts and firm raw material costs.

Market participants noted that a stronger US dollar, elevated global interest rates, and cautious economic sentiment have limited buying activity across the stainless steel value chain. At the same time, the market has entered the traditional consumption off-season, with end-users maintaining a wait-and-watch approach amid high inventories and uncertain demand prospects.

Crude stainless steel production from 43 major Chinese mills is expected to decline to around 3.61 million tonnes (mnt) in June, down 5.6% from May levels. While lower output has helped prevent a sharper correction in prices, the reduction has not been sufficient to trigger a sustained market recovery.

Demand remains the key concern. Apparent stainless steel consumption in China softened to around 3.4 mnt in April, while inventory levels continue to indicate sluggish offtake from downstream sectors.

Meanwhile, firm nickel pig iron (NPI) prices continue to support stainless steel production costs. Cash production cost for 304-grade cold-rolled coil (CRC) at around RMB 14,608/t as of mid-June, limiting downside pressure on finished stainless steel prices.

As of 16 June, 304-grade 2B CRC prices were assessed at around RMB 15,750/t exw-Foshan. Market participants expect prices to remain largely stable in the near term, supported by production cuts and raw material costs, although weak demand and elevated inventories are likely to cap any meaningful upside.

Outlook

China's stainless steel market is expected to remain balanced between supply-side support and demand-side weakness, with prices likely to trade within a narrow range unless significant policy stimulus or a sharp improvement in consumption emerges.

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