Inner Mongolia is the main chromite mining area in China. At present, affected by the environmental protection policy of the Chinese government, the local government of Inner Mongolia has issued a policy of restricting electricity consumption and increasing electricity bills for high-energy-consuming factories, which has led to a reduction in ferrochrome production in the Chinese market. Ferrochrome continues to rise in the Chinese market. As we all know, ferrochrome is the main raw material for stainless steel production. Therefore, the price of stainless steel continues to rise due to the rising price of ferrochrome and strong market demand.
According to an analysis by insiders in the stainless steel industry, although the current government notices that the policy of restricting electricity consumption and increasing electricity tariffs will continue until the end of January 2020, it is highly likely that this policy will continue until the end of the first quarter. This is likely to cause stainless steel manufacturers to reduce production.
However, the Chinese New Year holiday is coming soon and this holiday will last 15-20 days. Most production plants in China will be shut down. This will lead to a sharp drop in the demand for China’s stainless steel market. However, as far as the author of this article understands, during the Chinese New Year holiday, China’s large steel companies did not have any suspension arrangements, and a large amount of stainless steel crude steel was put into the market. However, most of the downstream hot-rolling plants of steel companies choose to shut down and maintain equipment, which will cause a large number of hot-rolled coils to reduce production.The above two factors will lead to a large number of stainless steel crude steel accumulation and a significant reduction in hot rolling production. The market performance of this situation will be that after the end of the Chinese New Year holiday, the price of cold-rolled stainless steel will rise rapidly, but after a short and rapid rise. As a large number of hot-rolled coils enter the market and futures expire, a large number of cold-rolled stainless steel coils enter the market, and the price of cold-rolled stainless steel coils in the Chinese market will drop rapidly at the end of February. This is consistent with the author’s previous forecast article. (The above is just a speculation of the author of this article)
This is interesting, the volatile stainless steel prices will continue for some time. It is recommended to stock up in advance for factories with hard demand before the end of February. But if you are a trader and just want to stock up, it is not recommended to hold a large amount of stainless steel, because the price of stainless steel has reached a very high price.
PS: (If you like my analysis, please follow me). Author: Ewan Liao was written on: January 20, 2021.