SHANGHAI, Apr 4 (SMM) - Following the intensive production cuts of multiple stainless steel plants, another plant in east China, according to SMM survey, also suspended its production recently and planned to be closed for 10 days, affecting roughly 20,000 mt of 300-series stainless steel output. In response, the tumble of stainless steel futures prices finally stopped as of April 3.

In fact, since the beginning of this year, stainless steel futures prices have been on a persisting downward path with monthly declines of 5.07% in February and 10.84% in March respectively. During the day session of April 3, the most active stainless steel contract hit a new low of 14,600 yuan/mt since April 30, 2021, and then rebounded to close up 0.03% at 14,810 yuan/mt.

Spot market: The average spot price of 304/2B coil-raw (Wuxi) stood at 15,050 yuan/mt as of April 3, down 1.63% from the previous trading day. SMM research showed that the spot prices of stainless steel in the Wuxi and Foshan markets were on the wane. The transactions in the stainless steel spot market were still thin, and the spot prices declined further as cost weakened. SMM estimates that the spot prices will still have room to fall in the near term.

Supply: In terms of stainless steel output, according to SMM’s preliminary research, the total output of stainless steel plants across China may have increased slightly in March by about 2.9 million mt or 3.58% month-on-month. The mainstream 200-series stainless steel mills may have maintained loose schedule of production, so their output will not grow sharply.

In early March, a large stainless steel mill carried out overhaul due to equipment failure, which, though, will have a limited impact on the output. On the contrary, some stainless steel mills, including some state-owned ones, may have seen rising output with capacity ramped up. Therefore, the output of 300-series stainless steel in China will grow slightly in March. In addition, Indonesian stainless steel plants also had plans to ramp up the production of 300-series.

In March, the operating rates of 400-series stainless steel mills will be maintained at the current level, and the output will not grow sharply. The high stainless steel inventory will still curb the prices from a further rise.

According to SMM research, a stainless steel mill in east China that suspended production in March may have resumed production now, while another mill in east China was shut down. The 300-series output is expected to be cut by about 20,000 mt.

Inventory: As of September 30, the social inventory of stainless steel totalled 785,600 mt, a decrease of about 0.59% on the week. The inventory of 200-series stainless steel fell 0.79% on a weekly basis to 187,700 mt, 300-series dropped 0.36% to 472,100 mt, and 400-series lost 1.18% to 125,800 mt.

On the whole, the social inventory of stainless steel was slowly digested last week. Although the inventory in March was lower compared with February, it still increased significantly year-on-year. The excess supply and slow recovery of demand caused the prices of various raw materials to shrink, thus the collapsed cost support took a heavy toll on stainless steel spot prices. SMM expects that the spot prices of stainless steel will remain weak in the short term, and the social inventory will be falling slowly and return to normal levels in April.

Demand: The traditional peak season in March and April seemed absent as the demand remained sluggish.

Costs: NPI prices trended lower since last Wednesday, which dragged down the nickel ore prices. Meanwhile, stainless steel transactions also became sluggish, and the futures prices fell. SMM expects NPI prices to run with occasional drops.

Ferrochrome supply was in a surplus, but the retail sales were scarce. Chrome ore supply also remained tight, and the purchasing volume of high-priced chrome ore futures was low. Ferrochrome prices will fluctuate with some downward potential if the plants do not cut their production intensively despite firm chrome ore prices. Costs of stainless steel may drop further.

To sum up, the supply glut still persists amid the slow decline in inventory, while the cost gradually weakens, failing to support stainless steel prices. Therefore, stainless steel futures prices are expected to maintain a downward trend this week.