According to an SMM survey, the stainless steel production in China in May was approximately 3.2632 million mt, up 2.41% MoM and 4.66% YoY. Specifically, the production of 200-series stainless steel was about 870,700 mt, up 1.8% MoM; the production of 300-series stainless steel was about 1.737 million mt, up 6.01% MoM; and the production of 400-series stainless steel was about 662,100 mt, down 1% MoM.
At the beginning of May, the stainless steel market ran weak. Entering the traditional off-season, downstream consumption declined significantly after the Labour Day holiday. However, nickel ore prices stayed high amid slow Indonesian nickel ore approval, and NPI prices rose due to supply tightness. As a result, the overall cost for domestic stainless steel mills increased. While futures prices were driven up by overseas funds and policy influences, spot prices lacked upward momentum and stabilised amid weak end-user demand, despite cost support. The cost of 300-series stainless steel increased, leading to losses, but in the bearish market, stainless steel mills were reluctant to slash production to maintain market share. Some integrated steel mills in East and South China maintained high operating rates, leading to an increase in 300-series crude stainless steel in May. The prices of low-grade NPI, mainly produced from Philippines nickel ores, held stable. With steady downstream demand and decent profits, 200-series stainless steel saw a slight increase in production. For the 400-series stainless steel, both cost and demand held stable, resulting in flat crude stainless steel production.
Entering June, downstream demand for stainless steel remained weak. Stainless steel mills discarded the strategy of shipment control to support prices, but began to increase supply instead. Therefore, social inventory of stainless steel accumulated. In addition, with the warrant pressure brought by high futures prices and premium, the market sentiment turned bearish again after the strong performance of the non-ferrous metal sector, putting pressure on spot prices. Profits of 300-series stainless steel are expected to remain difficult to improve. On the raw material side, the total approval quotas for Indonesian nickel ore remained low, the prices of NPI and ferronickel stayed high, and the costs of high-carbon ferrochrome, coking coal, and silicomanganese also remained high. With the 200-series stainless steel maintaining profits, the production of 300-series stainless steel is expected to slightly decrease and may convert to 200-series stainless steel in June.
![[SMM Nickel Midday Commentary] On March 26, influenced by expectations surrounding the policy of “Indonesia's proposed levy of a nickel export tax,” nickel prices rose significantly](https://imgqn.smm.cn/usercenter/CjEnN20251217171733.jpg)
