Stainless Steel Production Declines Slightly in May, Remains High; Weak Consumption Intensifies Expectations for Production Cuts in June [SMM Analysis]

According to SMM survey data, China's stainless steel production in May 2025 declined slightly by 1.04% MoM and increased by 6.34% YoY. Production across different series showed significant divergence: the 200 series saw a 4.82% MoM decrease in production; the 300 series experienced a slight 0.05% MoM decline; and the 400 series registered a 1.44% MoM increase in production.

Despite stainless steel production hitting a record high in March and subsequent consecutive pullbacks in April and May, the overall supply scale remained elevated. During May, stainless steel smelting continued to face the dilemma of cost-profit losses. As macro disturbances faded by mid-month, market focus shifted back to fundamentals, revealing weak downstream demand and an overall market in the doldrums, intensifying competition among steel mills. However, influenced by production inertia and the boost from favourable macro conditions in early May, which led to improved spot transactions, the extent of production cuts in the month was limited.

In terms of the performance of different series, the 300 series maintained relatively stable production, while the previously increased production of the 200 series declined significantly. Despite the 300 series stainless steel still experiencing cost losses, as high-grade NPI prices bottomed out during the month, production costs continued to decline, alleviating the extent of losses for steel mills. Meanwhile, futures-spot arbitrage activities spurred by fluctuations in the futures market pulled down the actual transaction price of 300 series stainless steel, with spot cargo transactions at low prices showing moderate performance. In contrast, for the 200 series stainless steel, the concentrated production shift by steel mills in the early stage led to a surge in supply, but no significant improvement was seen in downstream demand, resulting in a severe supply-demand imbalance and a sharp price decline, prompting steel mills to actively reduce 200 series production.

Looking ahead to June, the stainless steel market will officially enter the traditional consumption off-season. As macro disturbances ease temporarily, market operation logic will revert to being dominated by supply and demand fundamentals. Previously impacted by the US tariff policy, stainless steel futures prices plummeted. Currently, the market continues to face a situation intertwined with supply surplus, weak demand, and pessimistic sentiment, with futures prices fluctuating at lows, subsequently driving spot prices down to recent lows. Despite some enterprises initiating production cuts in May, the industry's overall production remains at historically high levels. Under the multiple pressures of increasing external demand uncertainty, sluggish domestic demand, and insufficient market confidence, the profit margins of stainless steel enterprises have been severely compressed. It is expected that more steel mills will implement production cuts and maintenance plans in June, with the industry's overall production expected to decline further, thereby alleviating the current severe supply-demand imbalance.