The domestic energy consumption policy of "dual control", resulted in limited production and limited electricity
resulting in an up-trend of stainless steel. In early trading on Thursday (16 Sept'21), the main stainless-steel
contract closed its daily limit, with an increase of 6.98%, and the current price rose to RMB 20,680/t ($3,212/t),
a new record high in futures contract history. The impact of dual control of energy consumption continues to
expand. It is said that the production limit of stainless steel in Jiangsu and Guangdong is 50%, which may
be the main factor for the sharp rise in stainless steel prices.
Ferro nickel prices increase
In terms of raw materials, the price of ferro nickel remained at a high level. The latest transaction price was
RMB 1,480/nickel point. Suqian region issued an energy-saving and consumption-reducing letter, requesting
Jiangsu Huiran Industrial Co Ltd to reasonably schedule production plans and reduce comprehensive energy
consumption. The company stopped production across the board yesterday.
Power curtailment results in reduced production of ferro chrome
Regarding ferro chromium, the power curtailment situation has not improved. The energy control in Guangxi
has not reached the standards yet, the Yulin area is affected by power restrictions and hence have power
cuts. The Guizhou area is shut down due to power problems, and Inner Mongolia is about to usher in power
plant overhaul. The demand for ferro chrome is rising and the market is expected to remain strong in the
coming weeks.
Stainless steel production to drop by 100kt in Sept'21
The reduction in crude steel production in Sept'21 may exceed 100,000 t, while the output of hot rolling
will also decrease, mainly for the 300 and 200 series products, of which 300 series accounts for a larger
proportion and have a greater impact on the supply side. There are also some stainless-steel plants that
have received power-cutting requests.
On 15 Sept'21, the Shanghai Futures Exchange's stainless steel futures warehouse receipts recorded
12,564 t, a decrease of 61 t from the previous trading day. In the last week, stainless steel futures
warehouse receipts decreased by 546 t, a decrease of 4.16%. The single cumulative decrease was
15,391 tons, a decrease of 55.06%.
Huatai Futures believes that on the 15th, news of the production limit of ferro nickel and stainless steel came
out in many places. The expected reduction in stainless steel and ferro nickel production will expand.
The price of stainless-steel futures will rise sharply. It will set a new high after listing at night, and once the
main contract hits the daily limit. The spot price of stainless steel rose slightly on the 15th of the month.
The sharp rise in futures prices boosted market confidence and spot transactions improved. However,
the improvement was relatively limited due to the excessively high absolute price.
304 stainless steel inventory is at a relatively low level. Warehouse receipts continue to decline to historical
lows. Low inventory status increases price flexibility, and at the same time, the price of ferro nickel at the
raw material end is strong, and the limited production policy affecting the supply of stainless steel will
continue to decline, while consumption is relatively stable.
Outlook
Regarding the stainless steel market outlook, most institutions continue to be bullish, but it also suggests
that after short-term price surges, it is not appropriate to chase excessively high prices.
(20min delay)