SHANGHAI, Apr 2 (SMM) – Social inventories of stainless steel in China showed signed of declines at end-March, after the stocks hit the highest level on record last month. However, downstream demand has yet to recover sufficiently to support a sustained slide in the inventories, which may threaten lingering inventory pressure in April that will keep stainless steel prices under pressure.
SMM data showed that social inventories of stainless steel in China’s major consumption areas Foshan and Wuxi stood at 1.12 million mt at end-March, down 61,000 mt or 5.18% from end-February.
Traders accelerated shipments by lowering prices in March. This, coupled with the release of pent-up demand at the beginning of March and smaller arrivals at social warehouses due to the drastic output cut in February, led to the decline in stainless steel social stocks as of end-March.
With the resumption of production that outpaces the increase in downstream demand, stainless steel stocks may again build up slightly in April.
Industries in most Chinese regions accelerated their rebooting since mid-March as the COVID-19 epidemic became more contained. The business resumption rates in key areas including Zhejiang, Jiangsu, Shanghai, Shandong, Guangxi and Chongqing have risen close to 100%.
As SMM surveyed, stainless steel production in China rebounded 13.4% from February to 2.04 million mt in March, still 12.98% lower from a year ago. With operations at mills normalising, stainless steel output in China may further increase 11.5% on the month to 2.27 million mt in April, SMM estimates.
Domestic consumption has not fully recovered. This, together with falling export orders amid demand disruptions from the COVID-19 outbreak overseas, reinforced concerns about continued weakness in the stainless steel market.
