SHANGHAI, Mar 10 (SMM) – After hitting a record high of 24,785 yuan/mt on March 8, the most-traded stainless steel futures contract started falling off a cliff. The prices hit the daily limit down during the night trading on March 9, and this situation was extended into the next day, with prices trading at 19,700 yuan/mt, a drop of 20.51% in two days.

In the spot market, the average price of 304/2B stainless steel coil with burr edge in Wuxi stood at 22,300 yuan/mt on March 9, down 0.89% from the historical high on March 8.

On the supply side, the domestic stainless steel mills gradually resumed production in March after reducing production in January and February. Jiangsu Delong is expected to put its phase II project into trial operation in March, which is estimated to release 50,000-60,000 mt of output in March and release 10,000-110,000 mt of output each month after reaching full capacity. Other steel mills will put new capacity into operation in the future, which will increase supply pressure.

On the demand side, downstream purchases fell short of expectations after the Spring Festival. The growth rate of stainless steel demand is not very optimistic in the future. Hence, the prices will lack solid support. Sellers in the spot market are willing to sell as long as there are profits.

In the short term, limited supply in the spot market and rising costs will provide certain support to stainless steel prices, but the prices may still pull back due to bearish sentiment. In the medium and long term, the release of new capacity will put a cap on prices. The market needs to closely watch how the rising nickel prices will affect the nickel raw material purchase costs and production costs of stainless steel mills.

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