In 2023, stainless steel futures prices fell by 18%. In January, consumption was stronger than in previous years, and overcapacity after Chinese Lunar Festival suppressed prices
Since 2023, the overall stainless steel main chain has shown a fluctuating downward trend, with a price of 17470 yuan/ton on January 30th as the highest point for the year; On December 6th, it hit a new low of 13010 yuan/ton since November 19th, 2020, marking the lowest point of the year. The maximum decline for the year was 25.53%, and the annual decline was 18.38%.
Spot Price : In 2023, the average spot price of 304/2B rolls with rough edges (Wuxi) showed a fluctuating and weakening trend, with a maximum decline of 23.21% this year and an annual decline of 18.71%. According to the latest research by SMM, stainless steel spot transactions turned cold from January 22 to 26, 2024. However, the distribution volume of steel mills continued to decrease compared to January 15 to 19, and the overall social inventory remained stable with a slight accumulation. The accumulation of cold rolled inventory was more obvious, while hot rolled inventory was more scarce and well digested. Public warehouse delivery inventory in Wuxi increased significantly, and the current spot price is running strong.
Fundamental Analysis:
Supply side: In terms of production, the overall performance of the monthly total domestic stainless steel production and the monthly production of various series of stainless steel in 2023 was relatively stable, with inventory increasing by 10000 tons month on month and 90000 tons year-on-year in December. In December, as the end of the year approached, the production performance of domestic stainless steel plants varied. Some steel plants entered the equipment maintenance period, and the production declined compared to before, mainly reflected in some 200 series stainless steel plants. In December, the national production of 200 series stainless steel decreased by about 88500 tons; On the other hand, some maintenance steel mills in East China have resumed production, coupled with an increase in additional order demand from some steel mills towards the end of the year, mainly reflected in the 300 series stainless steel mills. In December, the national production of 300 series stainless steel increased by 153500 tons. In the short term, due to the rebound of the black sector and the winter storage sentiment, the demand for black varieties such as threads and hot coils has warmed up and prices have risen. Some steel mills, which mainly rely on long-term smelting, have gradually adjusted the supply of molten iron in stainless steel production lines, mainly affecting the domestic production of 400 series stainless steel. In December, the national production of 400 series stainless steel decreased by 58500 tons.
Inventory: According to SMM data, the total inventory of domestic stainless steel by region and series showed a fluctuating trend in 2023. After reaching a new high since March 2021 on September 21, inventory continued to be depleted. On December 28, inventory reached 742000 tons, hitting a new low since January 2023, a decrease of about 3.62% month on month and a year-on-year increase of 9.34%. In 2023, the production and apparent consumption of stainless steel increased significantly year-on-year, and the year-on-year increase in social inventory is a normal phenomenon. Entering 2024, the total inventory of stainless steel in different regions and departments in China is gradually accumulating, and demand is slowing down as the Spring Festival holiday approaches. SMM predicts that the overall social inventory will maintain a low-speed accumulation trend in 2024.
On the demand side: In 2023, the overall downstream demand is strong. Although stainless steel does not show strong demand during the off peak season, the downstream has maintained a relatively stable consumption level, and the year-on-year growth rate of apparent consumption is higher than the year-on-year accumulation of social inventory. In 2024, according to the latest research by SMM, downstream actual consumption is relatively strong compared to previous holidays, and spot resources, especially hot rolling and flat plates, are scarce. The price difference between hot and cold has narrowed to 200 yuan/ton, and some hot rolling has experienced reverse super cold rolling, which also proves the existence of terminal demand. In the short term after the Lunar New Year holiday, due to the slowdown in Indonesian nickel mining quota approval and downstream rhythmic purchasing, demand may be strong and may fluctuate and weaken in the long term.
SMM's outlook: the total production of stainless steel from various series on the supply side of stainless steel fundamentals will increase year-on-year in 2023, with strong overall downstream demand. Entering 2024, stainless steel production in January remains at a relatively high level, with downstream actual consumption slightly stronger than before previous holidays. Social inventory only increased by about 1.97% month on month. SMM predicts that stainless steel futures may fluctuate widely in the short term, and prices may remain weak after the Lunar New Year holiday due to overcapacity in stainless steel production.
Please do not hesitate to contact me at jeantang@smm.cn or 86-19946295759 if you have any question or inquiry.
