Stainless Steel Prices Are Likely to Remain Rangebound after Pulling Back

SHANGHAI, Feb 23 (SMM) – The stainless steel futures prices rose during January 28 - February 16, and pulled back from February 17. The most traded SHFE SS contract dropped by more than 600 yuan/mt and fell below the 5-day and 10-day moving averages, gaining support at 30-day moving average.

On the raw material side, the 30% tax on stainless steel scrap is cancelled, which lowered the raw material costs. The steel mills have rich profits, and they have lowered the purchasing pries of stainless steel scrap amid falling futures prices today. As the stainless steel is becoming more cost effective, the prices of NPI may be forced down. However, the NPI supply is still tight, and the downward room for the prices is limited.

According to SMM survey, the steel mills have not received a large number of orders, and the falling prices may boost the transactions amid sufficient profits.

The demand in the spot market is weak today. The enterprises in Wuxi have not started their procurement, and some arrivals are stranded at ports. Most steel mills are delivering the goods for previous orders, and there are few new orders. Besides, the transactions were poor due to the serious COVID-19 pandemic. In Foshan, the arrivals are normal, but the consumption is relatively low, and the prices stand high. The downstream users are trying to force down the prices. The average spot price of 304/2B coil (burr edge) in Wuxi was stands at 19,350 yuan/mt today, down 0.26% from yesterday.

The spot transactions of stainless steel have been weak recently, providing limited support for the stainless steel prices. The new capacity in Xiangshui, Jiangsu is expected to be put into production in May, and the total stainless steel output in the market will not increase significantly in the short term. The stainless steel prices will be mainly affected by the raw material costs and market sentiments. However, the global supply of nickel remains tight, as the trade sanctions will only impact the nickel trade flow. The costs of stainless steel are expected to remain in an upward trend in medium to long term.

Therefore, SMM expects the spot prices of stainless steel to remain rangebound.