Stainless steel production in China rises due to supply shortages

Stainless steel futures in China are up 5% this week as higher base nickel prices and limited supply boosted the price of metal used in vehicle and kitchenware.

The most active March stainless steel contract on the Shanghai Futures Exchange rose to a daily growth limit of 14,725 yuan ($ 2,280.72) per tonne, the highest level since late October.

The cost of smelting nickel iron, a feedstock for stainless steel, remains high as many Chinese smelters use recently acquired expensive nickel concentrate, according to a report from consultancy Mysteel, citing a market source.

Nickel prices continued to climb, with the London Metal Exchange's benchmark hitting $ 18,000 /t for the first time since September 2019, as continued turmoil at key New Caledonian producer fuel supply concerns.

The decline in nickel stocks in warehouses controlled by the Shanghai Stock Exchange, which more than halved in 2020, has also increased pressure on prices.

“The domestic spot premium continues to strengthen and there is still support from the nickel price,” said analysts at Huatai Futures.

“The price of stainless steel futures may remain high for the moment,” and the deficit in the spot market will provide additional support, they said.

Iron ore prices also rose, boosted by restocking at Chinese steel mills. The most active May contract on the Dalian Mercantile Exchange rose 3.1% to 1,062.50 yuan a tonne at the close of day trading.

February contracts for steelmaking ingredient on the Singapore Exchange rose 1.2% to $ 167 per tonne by 07.09 GMT.

Spot iron ore for China's leading steelmaker SH-CCN-IRNOR62 stabilized at $ 168 a tonne on Wednesday, according to consulting firm SteelHome.

Construction steel rebar on the Shanghai Futures Exchange rose 1.7% and hot rolled coil rose 2.9%.