1. The Recent Trend Of China's Stainless Steel Prices Is Not A Simple Increase.
The recent trend of stainless steel prices in China is rather complex and not in a state of continuous rise. (I) Previous Rise And Its Causes Price Increase Performance Over a period of time leading up to October 11, 2024, there were slight increases in stainless steel prices. For instance, as of October 10, the daily average price for spot 304/2B stainless steel plate with dimensions 1.012192438 (tolerance 0.91) was quoted at 13078.57 yuan per ton, an increase of 3.98% from the beginning of the week.
On October 14, the price of 304, 1.0 four-eight foot flat plates from Yuxin Metal Technology Co., Ltd. in Jiangsu was reported by Hongwang at 12900 yuan per ton, an increase of 50 yuan per ton from the previous trading day; the price of 304, 2.0 four-foot coil was reported by Hongwang at 13950 yuan per ton, also an increase of 50 yuan per ton from the previous trading day. Analysis of the reasons for the rise Cost Support Aspect From an upstream perspective, as the futures market rebounded continuously before the holiday (before National Day in 2024), steel mills became more willing to purchase raw materials. After the holiday, spot nickel iron prices also rose, providing stronger support for stainless steel costs. Demand and Market Sentiment Benefiting from the positive sentiment driven by pre-holiday incentives, market transactions significantly improved at the initial stage of the resumption of work, with most businesses reporting an increase in sales volume.
Under the support of macro policies, market confidence was significantly boosted, coupled with a decline in steel production and no accumulation of social inventory, these factors collectively pushed up prices. (II) Recent Decline And Its Causes Price Decline Performance On October 17, 2024, the prices of stainless steel in major domestic markets fluctuated. The price of 304 remained stable with a slight decline of 50-100 yuan per ton, while 201 showed weak stability and 430 experienced a decline of 50-100 yuan per ton. In Wuxi, the price of 304 remained stable with a slight decline of 50 yuan per ton, 201 showed weakness, and 430 dropped by 100 yuan per ton; in Foshan, the price of 304 fell by 50-100 yuan per ton, 201 showed weakness, and 430 dropped by 50 yuan per ton.
On that day, the main contract of stainless steel futures, 2412, closed at 13780 yuan per ton, down by 250 yuan per ton. Analysis of the reasons for the decline Impact of Futures Market The futures price of stainless steel has dropped significantly. During the night session and the first hour of the morning, the real-time trend fluctuated around the hourly moving average, with a decline after 10:30, weakening until the close. The candlestick chart showed a large bearish candle, with clear suppression from the semi-annual moving average.
The entanglement stage between the moving average and candlestick chart has led to a blow to merchant confidence, increased bearish sentiment in the market, and thus affected the spot market prices. Market Supply and Demand Relationships Although there were previously favorable factors such as cost support, improved demand, and stable inventory levels, with market changes, it is possible that the demand side lacks sustained strong momentum. Without new developments to balance the market on the supply side, prices are prone to decline under the influence of downturns in futures markets. II. Factors Affecting The Trend Of China's Stainless Steel Prices (I) Raw Material Prices Nickel Price Impact Nickel is an important raw material for stainless steel, and fluctuations in nickel prices have a significant impact on the price of stainless steel. For example, in previous market conditions, nickel futures prices fell by more than $300 in the afternoon; Shanghai nickel prices continued to rise by several hundred yuan; stainless steel futures main contracts saw a slight increase of several dozen yuan, with other contract prices rising by up to more than 100 yuan.
These fluctuations in nickel prices were accompanied by fluctuations in stainless steel prices. When nickel prices rise, if other conditions remain unchanged, the cost of stainless steel increases, leading to upward price pressure; conversely, when nickel prices fall, stainless steel prices may be dragged down. Other Raw Material Impacts Materials like high carbon ferrochrome and molybdenum iron are also raw materials for stainless steel production, and their price stability or fluctuations can impact the cost of stainless steel. For example, on October 17, 2024, the spot nickel plate price in the Yangtze River non-ferrous metal market was 133,900 yuan per ton, up by 350 yuan per ton; the price of high carbon ferrochrome FeCr55C1000 in Sichuan region was 8,500 yuan per 50 basis tons, unchanged; the price of molybdenum iron FeMo60 in Henan region was 244,000 yuan per ton, up by 1,000 yuan per ton.
The different trends in these raw material prices collectively influence the price of stainless steel. (II) Market Supply And Demand Relationships Demand Side Seasonality and volatility of terminal demand November is traditionally a slow season for stainless steel demand, which may lead to a decline in demand during this period and affect price trends. For example, in October 2024, despite previous improvements in demand, market expectations for an increase in stainless steel prices may weaken due to the upcoming slow season, and actual demand may struggle to sustain price increases. Macroeconomic and Policy Impact on Demand The macroeconomic situation affects the demand for stainless steel in various industries, such as construction and machinery manufacturing. If the macroeconomy grows weakly, the demand for stainless steel in these industries will decrease. At the same time, policy implementation also impacts demand; for example, infrastructure policies that stimulate the construction industry may increase the demand for stainless steel.
On the contrary, without policy support or during policy adjustments, demand may be suppressed. Supply Side Steel Plant Production and Scheduling Plan The production capacity and scheduling of steel mills directly affect the supply of stainless steel. If steel mills increase their scheduling, market supply will increase, and prices may fall under conditions of unchanged or reduced demand.
Conversely, if steel mills reduce their scheduling, supply will decrease, and prices may rise when demand is stable or increasing. There have been instances where a decline in steel mill scheduling has led to upward pressure on stainless steel prices. If steel mill scheduling adjustments occur later, they will once again impact the relationship between supply and prices. Inventory Level The level of social inventory is an important reflection of market supply and demand. If social inventory continues to increase, it indicates that the market supply is excessive, and there is downward pressure on prices; if inventory remains stable or declines, with demand present, prices may remain stable or rise. (III) Market Sentiment And Futures Markets Transmission of Market Sentiment The emotions of market participants have a significant impact on prices. When bearish sentiment heats up in the market, such as after the decline in stainless steel futures prices on October 17, 2024, traders' confidence is dented, leading to more price concessions to maintain inventory reduction operations.
This sentiment can be transmitted from the futures market to the spot market, causing spot prices to fall. Conversely, if market sentiment is optimistic and participants actively purchase and hoard goods, prices may rise. Price Discovery Function of Futures Market The trend of futures prices for stainless steel has a guiding effect on spot prices. Futures market participants anticipate future prices and trade based on various information. When futures prices experience significant fluctuations, it affects the expectations and decisions of spot market participants, which in turn influences spot prices.