Stainless steel production cuts fell short of expectations amid macro tailwinds in July, with market transactions recovering. Production may increase in August [SMM analysis]

According to SMM survey data, national stainless steel production in July 2025 fell by 1.21% MoM and increased slightly by 0.21% YoY. By series, production of 200-series stainless steel decreased by 1.97% MoM; production of 300-series stainless steel decreased by 0.03% MoM; production of 400-series stainless steel decreased by 3.45% MoM.

In July, although overall stainless steel production continued to decline, the decline did not reach previous expectations. Despite the continuous pullback in stainless steel production in recent times, it remained at a relatively high level. Affected by the consumption off-season, market demand failed to match the previous supply, leading to sluggish transactions and a subsequent decline in prices. The in-plant inventory, front-end warehouse inventory, and social inventory of stainless steel mills all remained at high levels, with severe production losses. The willingness of steel mills to produce declined significantly, and news of production cuts emerged frequently at the beginning of the month. However, with the continuous production cuts by stainless steel mills and the continuous stimulation of macro tailwinds, the SS futures market stopped falling and rebounded, with spot prices rising accordingly. The losses of steel mills improved to some extent. In addition, stainless steel spot adopted a strategy of stable pricing and active shipping during the month. Stainless steel transactions in July recovered significantly, inventory pressure was alleviated, and the intensity of production cuts by steel mills decreased accordingly.

From the performance of each series, the production of 300-series stainless steel remained largely stable during the month, while the production of 200-series and 400-series stainless steel both declined further. Driven by the strength of the SS futures market, the price of 300-series stainless steel strengthened accordingly, increasing the arbitrage space between futures and spot for traders and enhancing market activity. Despite the simultaneous rise in high-grade NPI prices, stainless steel mills remained in losses for most of the month, but the degree of losses had eased. Due to the previous increase in production by steel mills, the supply of 400-series stainless steel was significantly surplus, and prices fell consecutively during the month. Coupled with the tight supply of high-carbon ferrochrome, it was difficult to reduce costs, and the planned production of stainless steel mills decreased. The price of 200-series stainless steel continued to decline in the early stage, and the cost price of stainless steel mills was significantly in losses. The planned production fell during the month, but with the recent rise in the price of 200-series stainless steel, the losses had been repaired. It is expected that the production of 200-series stainless steel will increase in August.

Looking ahead to August, it is expected that stainless steel production will stop falling and rebound. Driven by the continuous macro policy tailwinds in recent times, stainless steel prices have broken away from the previous lows, and the cost price losses of stainless steel mills have improved. With the strengthening of prices, market confidence has gradually recovered, and transactions have recovered to some extent. After the active shipping in the July market, the previous inventory pressure of stainless steel mills has been significantly alleviated, and production enthusiasm has increased accordingly. In addition, as the traditional consumption off-season gradually approaches its end, the market is relatively optimistic about the demand recovery during the "September-October peak season". Coupled with the implementation of the national "rat race" competition policy and the increase in large infrastructure investments in recent times, stainless steel is expected to achieve a steady rebound in August under the dual promotion of policy tailwinds and demand expectations.