SHANGHAI, Mar. 30 (SMM) --
Demand for EMM May wane Due to Possible Output Cut at Stainless Steel Mills
China’s domestic stainless steel market was sluggish in Q1 2011. For example, prices of #200 LH stainless fell from RMB 12,100/mt in early January to RMB 11,400/mt in late March, down RMB 700/mt. Although prices of stainless steel constantly fell, operating rates at stainless steel mills in Q1 were relatively positive.
In April, SMM expects that stainless steel market will remain sluggish. Although downstream consumers may slightly increase purchases ,operating rates at most stainless steel mills are low due to poor orders. Meanwhile, stainless steel supply is still ample as producers did cut output in a large amount in March. Third, traders are still pessimistic towards stainless steel market outlook.
Therefore, stainless steel mills may strengthen efforts to cut output in April since losses at stainless steel mills further increased in February and March.
EMM in Slight Oversupply
Operating rates at China’s EMM producers are around 45%. Operating rates at producers in Guangxi, Guizhou, Hunan, Hubei, Ningxia were flat from those in February, while operating rates producers in Xiushan county, Chongqing increased by 15% due to production resumption at Wulin Manganese Industry.
SMM expects that supply and demand of EMM will be balanced if operating rates at EMM producers in major producing regions remain between 40-42%. Current demand contraction and supply increase make EMM in slight surplus.
Raw Material Prices Remain Firm
Prices of manganese ore, sulfuric acid were stable, while prices of selenium dioxide slightly advanced by RMB 10/kg. Production costs at domestic EMM prices increased by around RMB 15/kg last week.
At present, average profit margin at EMM producers, accounting for 45% of China’s EMM capacity, fell to 4-5%. Most EMM producers only have very thin profit margin and some producers already suffer from losses.
Prices of manganese ore, sulfuric acid and selenium dioxide will remain stable in the following week, and profit margin at EMM producers will continue to be low.
Weak demand from stainless steel sector and oversupply of EMM will continue to weigh down EMM prices to around RMB 15,000/mt in the following week.