Stainless steel output to extend increases in Aug despite record high stocks 

SHANGHAI, Aug 22 (SMM) – Improved orders will continue to expand production at China’s stainless steel mills this month, while domestic inventories have climbed to record highs, an SMM survey showed on Thursday August 22. 

Downstream purchases has yet to pick up, but stainless steel prices may find support from costs of raw materials, such as nickel ore, high-grade nickel pig iron (NPI), chrome ore, and high-carbon ferrochrome. 

An SMM survey indicated that production of #200 stainless steel is expected to grow 3.51% from July to exceed 1 million mt in August, with an increase of 2.99% in output of #300 series, standing at 1.21 million mt. 

SMM data showed that China’s social inventories of stainless steel expanded to record highs in mid-August, with the majority held by distributors. Spot trades remained quiet as of Thursday August 22 as downstream consumers only procured as demand. Inventory depletion is expected in September when demand recovers. 

Production expanded even as higher costs in feedstock eroded margins. For producers using low-grade NPI and steel scrap as feedstock, profits of #201 stainless steel averaged 67 yuan/mt in the month to August 22, down from 100 yuan/mt in July, SMM assessed based on spot prices of raw materials. 

The average margin for #201 stainless steel slipped to an even lower 30 yuan/mt for August, from 84 yuan/mt in July, if based on prices of in-plant raw materials at producers. Profits stood as high as 1,600 yuan/mt in November 2017.