SMM Review of SHFE Stainless Steel Prices in February

In February, SHFE stainless steel prices first fell for several consecutive days, and then went down again after a slight rally. On the macro front, the US Department of Labour announced on February 14 that the annualised CPI in January was 6.4%, exceeding market expectations. On the evening of February 15, the US Department of Commerce announced that the monthly rate of retail sales in January was 3%, far exceeding the forecast of 1.8% and higher than the previous reading of -1.1%, which also indicated that the economic status and prospects of the US are relatively optimistic. On February 16, the annual rate of PPI for January came in at 6%, which was higher than the forecast. During February, the Federal Reserve's hawkish speeches led to concerns about a sharp increase in interest rates in the future, weighing on commodity prices.

On the supply side, the total output of domestic stainless steel in February increased by about 21.58% month-on-month, of which the 300 series increased by about 16.94% month-on-month. The main reason for the increase is that most stainless steel mills completed maintenance and resumed normal production.

On the demand side, the recovery of market demand after the Chinese New Year holidays was far slower than expected. The demand for hot-rolled products in the industrial sector was released, but the demand for cold-rolled products remained weak. In addition, exports may have declined sharply year-on-year.

The prices of high-grade NPI slumped. Some traders and NPI plants cut their prices amid the high NPI supply and the sluggish market. Nickel ore shipments from the Philippines will increase somewhat as the weather conditions in the country get better. Short-term NPI prices will probably fall amid the stainless steel mills’ price cut.

The prices for high-carbon ferrochrome also dropped slightly. Downstream companies bought ferrochrome cautiously, and the market witnessed scarce ferrochrome transactions. Chrome ore arrivals have been low in March, driving up the ferrochrome plants’ costs. Stainless steel cost support may weaken.

In summary, the recovery of the stainless steel market in February was not as strong as expected, and the prices continued to decline due to the disturbance of macro news. SMM predicts that spot stainless steel prices in March will trend lower under the pressure of high inventory.