Stainless Steel Futures Record Seven-Month Low, Will Expanding Production Cuts Support the Prices?
The most-traded stainless steel futures contract consolidated after a steep fall on June 24 with downward potentials. The contract dropped again after opening today, and fell to a low of 16,290 yuan/mt since December 22, 2021, and recorded a loss of 1.03% as of 14:08 Beijing time.
In the spot market, the average price of spot 304/2B coil (burr edge, in Wuxi) was flat from last Friday at 17,500 yuan/mt.
Looking back at the beginning of last week, the spot prices of 300-series stainless steel dropped significantly below 18,000 yuan/mt as the centralised production cuts of steel mills as well as the joint effort to hold the prices firm failed to raise the prices, with a weekly fall of 800 yuan/mt. In addition, market sentiment was severely rattled by the short-selling incident of a company last Thursday. In addition, typhoon Chaba landed in Guangdong over the weekend, but the Foshan market was less affected; while the Wuxi market was again hit by the resurging pandemic, pulling down the spot prices.
SMM believes that on the supply side, production cuts across steel mills will expand in July compared with June for the purpose of mitigating losses.
On the demand side, though the pandemic has basically been brought under control and the demand side has improved, the terminals including real estate, automobile and machinery were still low. In addition, falling raw material prices have failed to underpin the stainless steel prices. Therefore, though production cuts will expand in July, the supply and demand imbalance will still exist if the demand recovers slower than expected.
To sum up, SMM believes that stainless steel prices will be falling this week amid weak supply and demand as well as resurging pandemic in China.