TELF AG on Stainless Steel Production Growth Leads to Inventory Surplus and Price Drop – April 28, 2023

Stainless steel production in China

Stainless steel production has been rising in China, with an estimated output of 3.0 Mt in March 2023, up from 2.8 Mt in February. This marks a strong Q1 for Chinese production, which has seen a 5% increase compared to the same period in 2022. However, this increase in production has led to higher inventory levels, well above long-run averages, resulting in lower stainless steel prices.

Consequently, CRU analytics predict that Chinese stainless steel production will face cutbacks through April. This is highlighted by the RMB650/t reduction in the tender price, which is expected to affect chrome ore prices in South Africa.

Chinese stainless steel production increased chrome ore and ferrochrome prices in Q1 2023. But the downstream demand for stainless steel has yet to rebound, leading to higher inventory levels than the long-run average. This has negatively impacted stainless steel prices, and production cutbacks are expected to follow.

Looking ahead, Chinese stainless steel production is expected to be 7.1% higher in 2023 than in 2022. However, this growth will likely occur mainly in the second half of the year, which means that the current downturn in production may be a temporary lull rather than a new trend.

Overall, the increase in Chinese stainless steel production has had a significant impact on the industry, driving up prices of raw materials but also leading to oversupply and lower prices for finished products. However, with production cutbacks expected in the short term, and strong growth forecast for the rest of the year, the market could balance out over time. It will be interesting to see how the industry responds to these changes and evolves in the coming months.