SHANGHAI, Jan 6 (SMM) - Since 2022, futures prices of stainless steel fell after opening high. Affected by the extreme event of LME nickel, futures prices of stainless steel reached a yearly high of 24,785 yuan/mt on March 9, and then fell back. As of December 29, futures prices of stainless steel gave up all the gains and declined 1.78% on the year, with the largest decline of 39%.
In terms of spot goods: The average spot price of 304/2B coil-rough surface (Wuxi) reached the highest point at 22,500 yuan/mt on March 8, and fell 24% as of December 29, with an annual decline of 1.7%.
Affected by the extreme event of LME nickel, the prices of stainless steel also reached an unprecedented high in March, and then fell sharply due to the supply surplus. In September, boosted by the bullish macro front and energy crisis that led to production cuts in overseas stainless steel mills, the profits of domestic stainless steel mills were relatively good. Coupled with the recovered domestic terminal demand, the domestic spot supply of stainless steel tightened. As such, the spot prices rose again.
In terms of inventory: In the first half of 2022, the inventory of SMM stainless steel in different regions remained volatile. The inventory of 300 series stainless steel in Wuxi and Foshan fell sharply by 179,000 mt and 117,000 mt respectively from July 31 to September 15, and then remained relatively stable. As of December 29, the inventory of 200 series and 400 series stainless steel was relatively stable.
Steel mills have newly set up some warehouses to deliver goods to agents and traders. As such, this part of invisible inventory neither belonged to social inventory nor directly flew into the terminal market. From May to June, the demand in the spot market was relatively weak, and market players preferred arbitrage and hedging. Therefore, the proportion of invisible inventory increased, and the in-plant inventory rose to a high level. Guangdong Jushen applied to become one of the delivery warehouses of the SHFE stainless steel contract in July 2022, which indirectly reduced the social inventory of stainless steel.
In terms of output: The output of SMM 200 series, 300 series, and 400 series stainless steel fluctuated during 2022. On October 31, the output of 200 series stainless steel was 1.03 million mt, reaching the highest level in the year. The 300 series continued to decrease after reaching the highest level on March 31 and fell 440,000 mt compared with August 31. The output of 400 series increased 20,000 mt on the year.
On the supply side: In 2022, a lot of new capacities were put into the production. However, due to the impact of the pandemic, the production progress was postponed, hence the actual supply increase was lower than expected. With the gradual saturation of the domestic stainless steel industry, some production companies planned to transfer their business abroad due to the costs and environmental protection. It is expected that the growth rate of stainless steel supply in China will gradually slow down in 2023.
On the demand side: Affected by multiple factors, the total domestic stainless steel consumption may fall for the first time in 2022. During the year, the demand in the downstream sectors has also undergone some changes. Due to the rapid development of energy equipment sector, the demand for stainless steel increased year by year. Meanwhile, due to the decline in the operating rates of real estate, the demand for stainless steel from construction and decoration sectors weakened.
In summary, SMM predicts that China's stainless steel consumption may gradually recover in 2023, but the recovery growth rate is limited.
![[SMM Analysis] Bearish Factors Materialize, Sentiment Recovers, Supply Marginally Contracts, Stainless Steel Inventory Slightly Destocks](https://imgqn.smm.cn/usercenter/UhBXJ20251217171724.jpeg)
