Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

China’s stainless-steel production could remain unchanged or rise slightly in contrast to global cues that suggest a drop in the stainless-steel output in 2020.


Liu Yanping, Secretary-General of China Special Steel Enterprise Association told local media recently that consumption in Europe and the US could drop by 15-20pc in 2020. However, despite a 2.74pc decline in the stainless-steel output during H1 2020, global consumption in 2021 will rise by 5-6pc.  


Yanping added that China’s macroeconomic growth is decelerating with no obvious effect of the recent economic stimulus policies, but new infrastructure will be one of the future investment themes for the country. 


China reported a 9.8pc drop in stainless-steel output in Q12020 due to the COVID-19 pandemic but it increased by 30pc in Q2 2020 as infections waned and the country reopened for business. 


The Asian nation’s stainless-steel output reached 13.96mn mt in H1 2020 falling by 2.74pc from the prior-year period. In the first half of the year, China’s apparent consumption of stainless steel was 11.65mn mt, falling by 2.27pc from the same period last year. China’s per capita apparent consumption of the metal increased by 8.8pc from 17.18 kg in 2019. Yanping shared that this figure could grow further. 


Stainless-steel capacity development

In 2019, China’s stainless-steel crude steel production capacity was about 38mn mt with the capacity y utilization rate of 77.4pc compared with the global average of 71pc. Over the next three years, the country could add 8mn mt of additional capacity.

China’s existing stainless-steel cold rolling capacity is 20mn mt, which is also slated to rise as more companies add new cold rolling capacity.


China’s stainless long products are more competitive than plates Liu Yanping noted, adding that the number of domestic stainless-steel billet continuous casting, bar, and wire projects has gone up. Moreover, the return of Indonesian billet to the country will intensify the competition in the longs market.


Capacity is also expected to rise as more companies set up operations in this sector. In 2019, the top 10 domestic companies accounted for 81pc of the total stainless-steel industry, Yanping observed.


China Baowu acquired Taigang Stainless Steel in 2020 to form a combined entity with 10mn mt stainless steel production capacity. After this acquisition, the top 10 companies will account for 85pc of the total industry that caters to the domestic as well as export needs. 


Yanping observed that Chinese domestic demand was stable but international demand was still affected by the pandemic. He added that the government’s decision to increase the export tax rebate rate for some stainless-steel products has limited stimulus to stainless-steel exports. 


Product development

Yanping claimed that the new Chinese stainless-steel companies have utilized technology and localized their equipment resulting in lower costs for the products. However, stainless product variation is below global levels. Yanping said that the proportion of 200 series stainless steel production in China is much higher than 316, which is far below the global development level of 7pc.


He indicated that although China is a major importer of nickel and chrome ore resources, it suffers from frequent price fluctuations. In fact, 85pc of nickel, the main raw material of the country’s stainless steel is imported and almost 100pc of chrome ore is imported. After Indonesia’s mining ban, China has started importing nickel from the Philippines, and chrome ore from South Africa. 


From January to July this year, China’s import volume of nickel ore dropped by 33.72pc to 17.31mn mt, while ferronickel import volumes increased by 89.43pc to 1.82mn mt. Refined nickel imports, however, fell by 40.03pc to 72,900mt as did chrome ore which declined by 10.74pc to 7.99mn mt. The import volume of ferrochrome also fell by 11.25pc to 1.72mn mt.


Yanping said that the state currently encourages the use of scrap steel as raw materials and the short-flow steelmaking process of electric furnace smelting. 


Development of the industry

Yanping said that the stainless-steel industry consumption would be boosted through various transportation and water conservancy projects along with the material used in construction and other infrastructure. According to Yanping, the localization of high-grade stainless steel and nickel-based alloys has resulted in the beginning of export of duplex stainless steel and an increase in domestic equipment exports. 


Speaking on trade barriers Yanping said that the implementation of antidumping measures against China by foreign countries also requires attention since trade policies and friction are uncertainties that could affect the Chinese stainless-steel industry moving forward. 


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