SMM analysis on China June stainless steel output and July forecast

According to the SMM survey, China's stainless steel production in June was approximately 3.2302 million mt, down 1.17% MoM but up 5.17% YoY. Among this, 200-series stainless steel production was 916,200 mt, up 4.59% MoM; 300-series stainless steel production was 1.6449 million mt, down 5.30% MoM; and 400-series stainless steel production was 669,100 mt, down 2.08% MoM.

In early June, the stainless steel market performed poorly. The spot prices held stable in the first ten days but started to decline continuously in late June. Entering the traditional off-season, end-user consumption weakened significantly, leading to an overall decline in NPI prices in June. Therefore, the cost support for domestic stainless steel prices weakened. Although the decline in June was not significant, the losses of domestic stainless steel mills, which had operated around the cost line, further worsened. To reduce losses, some 300-series stainless steel mills cut production. The operating rates of stainless steel mills in East and South China decreased, with production lower than expected. In contrast, the production of state-owned steel mills stayed stable. The price of 200-series stainless steel declined, but its profitability was better than that of the 300-series stainless steel. Some electric furnace-based steel mills in South China maintained high profitability and end-user demand held stable, leading to a significant increase in 200-series crude stainless steel production in June. For 400-series stainless steel, despite entering the off-season, rigid demand persisted. After the prices of high-carbon ferrochrome and plain carbon steel fell, the cost of 400-series stainless steel decreased, resulting in a slight increase in crude steel production.

Looking ahead to July, stainless steel demand will remain weak, and the oversupply is unlikely to improve. The pressure on social and in-factory inventories of stainless steel will increase, hindering spot price rises. As nickel ore premiums have started to rise and NPI prices have stopped falling, the cost of stainless steel is unlikely to continue to fall. At the beginning of July, there was a strong wait-and-see sentiment among downstream buyers, and the strong performance of non-ferrous metal futures did not drive up spot prices. To reduce losses, stainless steel mills lowered the scheduled production of 300-series stainless steel in July. Additionally, entering the summer, high temperatures reduced the operating rates of downstream producers, and some stainless steel mills in South China are expected to start annual maintenance. In summary, it is expected that 300-series stainless steel production will significantly decrease in July, while the production of 200-series and 400-series stainless steel may see a slight increase.