Review of stainless steel market in China for 2005

Stainless steel market situation in the passing 2005 is unforgettable. Generally speaking, we should pay attention to the following aspects:

1)   Market price has fluctuated with large extent in China stainless steel industry.
Taken 304 2B2mm products in ZPSS for example, its price has gone up from 25800 Yuan/ton at late Dec.04 to the peak level of 26600 Yuan/ton at late Feb.& early Mar.05, after that it has begun to drop, and up to late Nov.05, it has declined to 17900 Yuan/ton. Meanwhile stainless steel price in Baoxin Stainless Steel Co. Ltd. has dropped from 26500 Yuan/ton to 17500 Yuan/ton, with dropping extent reaching 34% of 9000 Yuan/ton.

2)   Steelmakers and distributors have begun to lose profit instead of gaining huge profit in the previous time.
Steelmakers have begun to suffer profit loss. Take 3mm 304 HR & 0.6mm CR for example, the profit margin of steel enterprises has changed from gaining 3000 Yuan/ton profit to losing 3000 Yuan/ton profit.

Meanwhile the distributors have also suffered this kind of situation. The highest profit margin has been 1000 Yuan/ton, while they have also suffered the most serious profit loss of 2000 Yuan/ton.

3)   Stainless steel import volume changes with large extent.
Take CR products for example, CR import has reached the peak level of 123.3 thousand tons in Mar.05, which has dropped to 67.2 thousand tons in Oct.05, with dropping extent reaching 46%.

While in the same period of 2004, CR import has dropped from 54.1 thousand tons to –22.3 thousand tons in Aug.05, with dropping extent reaching 76.4 thousand tons.

4)   The price released by steelmakers each month has promoted stainless steel price up in the past, while it has little impact toward current market situation or even follow the market price trend.
Starting from Aug.04, the open quotation of steel enterprises has gone up month by month, which has promoted market price up firmly, while in May 05, market price has begun to drop, while certain steel enterprises have intended to push the price up. After that the open quotation of steel enterprises have moved away from market price, and starting from Jun.05, steelmakers’ general price has begun to follow the trend of market price.

Some steelmakers have even put forward the “hidden price policy”, which has worsened the price fall in stainless steel market.

5)   Stainless steel productivity has expanded
Major stainless steel CR plants in China have started the operation of 16 CR mills (a production line in Lisco is equal to 3 rolling mills, 2 rolling mills in Qingdao Posco, 2 mills in SKS, 4 mills in Baoxin Steel & 5 mills in Taiyuan Steel), forming 1.5 million tons of productivity.

Athough the new CR mills have begun to launch products to market since 2Q.05, esp. Baoxin Steel & Taiyuan Steel have supplied products since the second half year of 2005, the actual productivity for 2005 is less than 1/3 of the total productivity. However, the newly added productivity has been magnified in the market, thus some of them have requested to assure stainless steel price by limiting their output.

Due to various reasons, esp. the price of CR sheet & HR coil (imported HR coil) price has reversed,  the actual output increment may not exceed 200 thousand tons.

6)   The discussion on 200 series stainless steel has worsened, and the price of 200 series & 300 series products has fluctuated with large extent, meanwhile the supply of 200 series products has also fluctuated with large extent.
The dispute is still continuing, while there is no definite conclusion up to now. While during this period, it has affected 200 series & 300 series stainless steel to deep extent. For example, the price difference between 304 & Ni1 200 series products has fluctuated between 5300 and 10700 Yuan.

Meanwhile 200 series stainless steel products supply has fluctuated with large extent. No one dares to place order to the foreign countries in certain period. The price of 200 series stainless steel has fluctuated with large extent, and the monthly output of 200 series stainless steel in Zhejiang province has reached 100 thousand tons at most, while the lowest level has only been 10 or 20 thousand tons.

7)   It is said that stainless steel output in China will be oversupplied.
After the interview to Hao Peigang (from Taiyuan Steel), China Industry News has released that stainless steel output has exceeded that of demand, which should be paid attention to by China government.

Hao Peigang said, China has imported 2.9 million tons of stainless steel in 2004 (more than that of produced in China domestic market. While the existing stainless steel productivity and that under construction has totaled 15 million tons, plus the 10 million tons of scheduled productivity, general stainless steel productivity may exceed 25 million tons, higher than the global output in 2004.

Based on the research and investigation by Taiyuan Steel for several years, the largest stainless steel capacity in China may be 10 million tons. And the 15 million tons of productivity can be divided into three sections: The first one, large stainless steel enterprises with annual productivity exceeding 500 thousand tons. These enterprises cover Taiyuan Steel, Baosteel, ZPSS & Guangzhou Lisco etc. enterprises. The steelmaking equipments in these enterprises have conformed to the national policy as well as adopted the internationally advanced technique, and these enterprises have directed the developing trend of stainless steel industry. It is forecasted that they can form over 6 million tons of productivity up to 2008.

The second group, medium scaled stainless steel enterprises complying with national policy and the technique request on stainless steel products. The productivity of these enterprises has been around 2.4 million tons, these enterprises cover Dongbei Special Steel, Nantong Special Steel, Wenzhou Ruitian Steel, Huzhou Jiuli, Zhejiang Liqingshan etc. enterprises, meanwhile Sichuan Stainless Steel Co. Ltd has been under construction, and their total productivity will exceed 2.8 million tons.

Moreover,  200 thousand tons productivity of former stainless steel system (such as Daye Special Steel, Fushun Special Steel etc.) has not been covered in the statistics data.

The third section covers Jiangsu, Zhejiang, Fujian, Guangdong & Guangxi areas, and these enterprises’ productivity has exceeded 5 million tons. If China government does not control its productivity, these productivity will increase to further extent.

The deputy manager of Baosteel Stainless Steel—Liuan has indicated that if the scheduled projects and those projects under construction starts operation, stainless steel melting productivity will reach 20 million tons in 2010, and that of HR productivity will reach 15 million tons, moreover, CR productivity will exceed 10 million tons.

Liuan has divided current stainless steel productivity into three parts just as that of China Industry News, the difference is: the first group is 6.7 million tons, the second group is 2.9 million tons, the third group is 500 thousand tons and their total productivity is more than 10 million tons.

Liuan has appealed that there is a long way in front of China stainless steel industry, and China government should implement a rational industrial policy to guide the development of stainless steel industry.

In Jul.05, Lilong the director of China Metal Material Circular Association Stainless Steel Branch has indicated in “review and outlook of China stainless steel industry” that up to end 2008, stainless steel productivity in China will reach 17.48 million tons.

During the 4th China International Stainless Steel Conference held in Sep.05, the commissary director of China Special Steel Stainless Steel Branch—Licheng has indicated in its speech of “problems in the development of stainless steel industry in China “that the adjustment schedule of China stainless steel industry will come true in 2006. that is to say, stainless steel productivity will reach 9 million tons (4.9 million tons produced by state-owned enterprises, 1.6 million tons produced by joint ventures, and 2.5 million tons produced by private enterprises).

At present, three “10 million tons” has still been popular in China stainless steel market. The first one is: “existing productivity is 10 million tons, that under construction is 10 million tons”, and that under schedule is 10 million tons. And the second one is: “high grade 10 million tons, medium level 10 million tons and low grade 10 million tons”.

8)   China government enhanced macro-control policy, stainless steel enterprises have to retreat from market or stop production due to the capital and environment protection etc. problems.
An event in Jiangsu province: in order to solve the tight capital situation, Changzhou intermediate court have adjudicated the fixed asset of a stainless steel enterprises to the accuser, and the equipments of a this plant has been disintegrated.

An event in Zhejiang province: banks have enhanced their supervision, and in order to reclaim capital, the inventory of a stainless steel distributor has been auctioned.

Events in Hebei & Liaoning provinces: two newly built stainless steel enterprises with annual productivity reaching 200 thousand tons have been forced to stop production lacking of floating capital.

An event in Zhejiang province: a stainless steel enterprise with 300 thousand tons of annual productivity has been forced to stop production due to its conflict with the local farmers, and it have not resumed production since 4Q.05.

9)   Fight in stainless steel industry has worsened.
Firstly, it is the competition between foreign stainless steelmakers and China domestic steel enterprises, this competition occurs both in the sales field and the raw material control.

The competition between China domestic steel enterprises, distributors and the end users has worsened.

10)  Stagnant and booming market situation co-existed in China stainless steel market.
After the large fluctuation in China stainless steel market in 2005, industry insiders in stainless steel industry has suffered stagnant situation, and most of them have retreated from current market.

While the outsiders of stainless steel industry have been unaware of this situation and they have still immersed in the hallucination of “rapid development and good profit”. Although many aspects have indicated that stainless steel industry in China has suffered serious oversupply situation at the moment, many parties have been booming and ready to inject lots of capitals into stainless steel industry.

At present, Baosteel & Naning Lianqiang’s 1.8 million tons project, Tangshan Steel’s 1.2 million tons project, and Wenzhuo’s 1 million tons project have been under construction.

All in all, stainless steel market has suffered huge fluctuation in the passing 2005, which would be unforgettable for all Chinese.

Source: SteelHome