China 304 Stainless Prices Rise as Futures Rally

China's 304-grade stainless steel market strengthened over October 29-November 4, with cold-rolled and hot-rolled coil prices in Wuxi each rising Yuan 300 per tonne as stainless futures rallied and mills lifted price floors.

MONTREAL (SteelPrices): China's 304 stainless steel market moved higher in the week to November 4 as a sharp rally in Shanghai stainless futures improved market sentiment and pushed mills and traders to lift spot offers.

Mysteel assessed 304-grade Hongwang 2*1240mm stainless cold-rolled coil in Wuxi, East China, at Yuan 14,200 per tonne ($2,128/t) on November 4, up Yuan 300/t from one week earlier.

The assessed price for 304-grade Tsingshan 5*1520mm stainless hot-rolled coil in Wuxi also increased Yuan 300/t week over week to Yuan 13,600/t.

Both assessments are on an in-warehouse and VAT-inclusive basis.

Futures Rally Leads the Spot Market Higher

The move began in the futures market.

The most-traded stainless steel contract on the Shanghai Futures Exchange closed the November 4 daytime session at Yuan 13,825/t, up Yuan 395/t, or 2.94%, from one week earlier, according to Mysteel's reporting of exchange data.

The futures rally improved sentiment in the physical market and encouraged traders to raise offers.

Separate Mysteel commentary during the week described the futures rebound as driven primarily by improved expectations and market sentiment rather than a complete reversal in underlying stainless supply-demand conditions.

Tsingshan Raises Its Price Floor

Tsingshan Group, China's largest stainless steel producer, reinforced the move by increasing the minimum prices for 304-grade CRC and HRC sold through its agents.

The company raised its price floor by Yuan 200/t on November 3.

Traders followed with higher offers, helping lift spot assessments in Wuxi.

Production Costs Also Provide Support

Higher production costs added another layer of support to the spot market.

Chinese producers of 304-grade CRC using outsourced domestic high-grade nickel pig iron recorded an average daily cash cost of Yuan 13,302/t on November 4, up Yuan 11/t from one week earlier, according to Mysteel.

Because spot prices increased much more sharply than costs, average gross profit for those producers rose by Yuan 289/t to Yuan 898/t.

The cost data therefore show that producers had slightly higher input costs, but the week's improvement in margins came primarily from the larger increase in finished stainless prices.

Trading Activity Improves

Improved sentiment was also reflected in physical trading activity.

Average daily trading volume across all stainless grades among the 63 producers tracked by Mysteel reached 27,670 tonnes during October 29-November 4.

That was 5.1% higher than the previous week's daily average.

The increase suggests that the rise in prices was accompanied by better trading activity rather than occurring solely on paper in the futures market.

However, stronger weekly trading does not by itself establish a sustained improvement in end-user demand.

Market Still Needs Confirmation From Demand

Recent Mysteel commentary has cautioned that China's stainless fundamentals remain mixed.

While futures, cost support and improved sentiment have helped lift prices, high production and comparatively weak downstream demand remain important constraints.

That makes the next several sessions important for determining whether the November rally can hold once the immediate futures-driven buying response fades.

Source: Mysteel Global; Shanghai Futures Exchange.

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