300 Series Cold Rolled Triple Increase! Foshan Stainless Steel Weekly Inventory Increases by 0.43%

July 17, 2024, Foshan Market News - Mid-July has arrived, and the anticipation for stainless steel remains just that: anticipation. Amidst the challenging times, the tangle of prices and costs, and the situation of weak supply and demand has not changed.

Overall Analysis

200 Series:

Cold rolling saw an increase with Hongwang and Foshan Chengde. The latest production dates for both Beigang New Material and Foshan Chengde are on July 12th. However, most of Foshan Chengde's production dates are concentrated on July 5-6th and July 10th. The latest production dates for Yangjiang Hongwang and Zhaoqing Hongwang are July 13th and July 7th, respectively. Fujian Hongwang's production dates are mostly concentrated on July 3-4th and July 6-9th.

300 Series:

Cold rolling saw a significant increase, particularly with Delong, followed by Shangke, Hongwang, and Yongjin, although the amount of new arrivals is limited. The latest production dates for Zhaoqing Hongwang and Yangjiang Hongwang are July 11th and July 9th, respectively. The latest production date for Qingtuo Shangke is July 8th, and some of Fujian Yongjin's production dates are concentrated on July 2-3rd. A portion of Yongwang's production dates are in June, specifically on June 4th. In hot rolling, the reduction is evident in Dingxin and Beigang New Material, followed by Delong and Taigang, with other origins showing no significant changes.

400 Series:

Cold rolling saw an increase with Qingtuo Shangke and Hongwang, with some of Zhaoqing Hongwang's production dates concentrated on July 2nd. Hot rolling saw an increase with Baosteel, while other origins showed limited changes.

Reasons for Analysis

According to the statistics from 51 Stainless Steel, the 300 series cold rolling accounts for 40.66% of the total inventory this time. More than 75.63% of the 300 series cold rolling in our specimen inventory is 304 wide cold rolling, so our inventory analysis this time mainly focuses on the 300 series:

Analysis 1:

From the perspective of resource structure, the arrival of goods exceeds the consumption, leading to a slight surplus in inventory. Within a week's cycle, the new resources are evident as the arrival of goods from Delong, and there are also small amounts of new goods from Qingtuo Shangke, Hongwang, and Yongjin in the inventory, with the rigid demand and the pace of goods arrival basically consistent.

Analysis 2:

With the market downturn, market transactions have slowed down, and the digestion speed has decreased.

Analysis 3:

Recently, there has been an increase in the closure of downstream factories and enterprises, coupled with business adjustments among market plate merchants. Plate merchants controlling risks have also had some impact on shipments.

Analysis 4:

Export processing volume is stable, so the driving force for inventory reduction is limited.

Inventory Data

The time for collecting specimen inventory data this time is: cold rolling on July 16th, hot rolling on July 17th. Note: Specimen warehouse inventory does not include delivery warehouse inventory.

This week's total specimen inventory is 376,600 tons, an increase of 1,600 tons from last week, an increase of 0.43%. Among them:

• 200 series inventory increased to 134,800 tons, an increase of 700 tons from last week, an increase of 0.52%;
• 300 series inventory decreased to 202,500 tons, a decrease of 400 tons from last week, a decrease of 0.20%;
• 400 series inventory increased to 39,300 tons, an increase of 1,300 tons from last week, an increase of 3.48%.

Warehouse Scene

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Stainless Steel Market Update

Date: July 17, 2024

The A-share market closed with two down and one up index, mainly fluctuating throughout the day.

Stainless Steel Futures and Spot Market

The futures market for stainless steel showed weakness, falling below the 13,900 mark in the morning and recovering slightly before falling again. In the afternoon, there was a slight rebound followed by another drop below the 13,800 mark, but it rebounded back above the mark, still closing in the red. The spot market was mostly stable in the morning, with some discounts for transactions, but the mainstream prices remained relatively stable. In the afternoon, as the futures market dived, the market prices for Delong gradually moved closer to the 13,500 base, and some warehouse receipt resources went as low as 13,470 base.

304 Cold Rolled Market

In the morning, the 304 cold rolled market with Tsing Shan agents continued to follow the flat plate price, while traders saw the first wave of some flat, and some specifications fell by 30-50 yuan/ton. The market was still quiet, but some still insisted on high position observation, and the mainstream market prices were still mostly between 13,530-13,600 base.

Afternoon saw a dive in the futures market, and the spot market prices began to fluctuate and fall. Some Delong and other resources returned to sales at the 13,500 base, and some warehouse receipt resources went as low as 13,470 base. High market prices mostly fell, and transactions remained quiet.

304 Hot Rolled Market

For 304 hot rolling, Tsing Shan agents kept the same price quotes, while traders of large plates and Dingxin narrow strips still mostly observed the same, and other sources fell by about 50 due to the impact of the plate, and the market's low price purchase also continued to explore and stimulate the market price to move down.

201 Market

For 201, hot rolling mostly kept the same price quotes, with some offering discounts of 10-30 for transactions; while cold rolling Tsing Shan agents reduced by 50 to accept orders, and market traders also fell by 20-50 to explore, J5 mostly went to 7,930-7,950 base sales, but the actual transaction part has already fallen to 7,900 base, the price is weak, and transactions are still relatively general.

430 Market

For 430, cold and hot rolling quotes are mostly flat, but some cold rolling resources have fallen by about 50 to facilitate transactions for delivery.

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📈 Impact of the Transition from Old to New National Standards for Rebar on the Market in Stages

Mysteel News: Since the release of the new national standard for rebar on June 25, the market price has fluctuated significantly, and some steel mills have successively issued announcements for the transition of hot-rolled ribbed rebar products from old to new national standards.

As of now, according to incomplete statistics by Mysteel, most steel mills will start to implement the production of rebar according to the new national standard in August, with a few completing the transition from old to new national standard production at the end of July or the beginning of September. At the same time, some warehouses in the East China region have also issued announcements regarding the deadline for the storage of old national standard products. Against the backdrop of continuous poor performance in rigid demand and hindered storage, this has further exacerbated market participants' concerns about the elimination of old national standard rebar. Recently, the mainstream futures and spot warehouse quotations in some markets in East China have shown a significant decline. The author analyzes the impact on the current market price from multiple angles of the current transition from old to new national standards.

⏱ Ideal Time Required for the Elimination of Old National Standard Rebar Inventory in This Round

The transition from old to new national standards for rebar was announced on June 25 and will be implemented on September 25, with a three-month buffer period. According to the weekly steel data research results of Mysteel, as of now, the national rebar inventory is 7.7057 million tons. In the past years, rebar has faced seasonal inventory pressure in July, August, and September. Under the background of weak demand, market concerns have further intensified. Overall, the pressure of old national standard rebar is concentrated in the East China region.

Assumptions for the transition of new standard rebar production and the elimination of old national standard rebar inventory (ideal calculation):

Assumption 1: At the beginning of August, 1/4 of the new standard rebar production is switched, and the apparent consumption is recognized as the recent average level. After synchronous calculation, the cycle required for the elimination of old national standard rebar inventory is 13 weeks.

Assumption 2: At the beginning of August, 1/3 of the new standard rebar production is switched, and the apparent consumption is recognized as the recent average level. After synchronous calculation, the cycle required for the elimination of old national standard rebar inventory is 10 weeks.

Assumption 3: At the beginning of August, 1/2 of the new standard rebar production is switched, and the apparent consumption is recognized as the recent average level. After synchronous calculation, the cycle required for the elimination of old national standard rebar inventory is 6 and a half weeks.

Assumption 4: At the beginning of August, 3/4 of the new standard rebar production is switched, and the apparent consumption is recognized as the recent average level. After synchronous calculation, the cycle required for the elimination of old national standard rebar inventory is 4 and a half weeks.

The above calculations only consider fewer variables, with the premise that the overall output of rebar has not changed significantly, the apparent consumption basically maintains the recent level of 2.33 million tons per week, and the market is fully committed to eliminating old national standard rebar. It can be seen that before the implementation of the new national standard for rebar, the less old national standard rebar is put into the market, that is, the earlier the steel mill switches to the implementation of the new national standard, the more conducive it is to inventory elimination. Due to the dynamic nature of the date when steel mills switch to the new national standard rebar, more than half of the steel mills have completed the transition to the new national standard in August, and the old national standard is successfully eliminated before September 25.

🔄 Disagreements on the Circulation Attributes of Old National Standard After the Implementation of New and Old National Standards

Looking back at the last adjustment of the rebar standard in 2018, there was a 9-month buffer period from the date of the new national standard release to the date of implementation, and the circulation attributes of the rebar produced before the implementation date had not changed fundamentally. The pace of elimination of old national standard rebar inventory was relatively slow, with fewer hard constraints and emotional rendering. This round of standards has changed from national recommended standards to mandatory standards, and the market has caused concerns about the circulation attributes of old national standard rebar. The current market concern has not ended, and the price still has the possibility of falling. On the one hand, the current spot merchants urgently need to replace the old national standard rebar with the new national standard rebar. On the other hand, it is necessary to accelerate the storage of old national standard resources. The demand in the short term is difficult to improve significantly, and it can only accelerate the radiation to the surrounding market by falling prices, squeezing the resource share of the surrounding market, and leading the decline in the surrounding market, which is conducive to the elimination of old national standard rebar resources.

📋 Whether the Delivery Standards for the Main Contract of Rebar Steel Have Been Adjusted

Looking back at the last transition from old to new national standards for rebar steel, the exchange issued an announcement one month before the implementation of the new standard rebar. From November 1, 2018, the old national standard rebar was not allowed to be used to make warehouse receipts for delivery. The newly registered warehouse receipts were made according to the new national standard rebar for warehouse receipt delivery, but the old national standard rebar that had been made into warehouse receipts could continue to be transferred and delivered. Based on this experience, it is inferred that the rebar steel futures contract for October 2024 will be registered according to the new national standard, and the old national standard cannot be registered for warehouse receipts, but the warehouse receipts that have been registered can be delivered, and this point has been clearly bet on the market.

At the time when the new national standard for rebar steel was promulgated, the price difference between September and October rebar widened. In mid-July, as the market's panic selling sentiment intensified, the spot price led the futures price to decline sharply, and the near-month contract fell sharply, with the September-October contract price difference reaching 184, the lowest level in recent years. It is not difficult to find that the core logic of this round of accelerated decline is the shrinkage of demand and poor expectations. Under such a background, the pressure of the transition from old to new national standards is relatively large, and the panic selling sentiment of the futures and spot warehouses that have been stored for a long time has intensified. With the announcement of the deadline for the storage of futures and spot warehouses in some markets in East China, the market sentiment has been shaken, and the price has accelerated the decline. However, the overall supply and demand structure in the north is relatively good, and the impact on prices is relatively small, leading to a further expansion of the price difference between the north and the south.

📉 The Possible Direction of the Spot Market's Supply and Demand Fundamentals at the Time of the Implementation of the New National Standard

Short-term Situation

According to the current rhythm of the steel mill's transition from old to new national standard rebar production, most will be concentrated in August. In late July, the supply pressure of old national standard rebar is not reduced, and the demand is weak in the short term. Under the condition that the circulation attributes of old national standard rebar are not clearly defined, the panic selling sentiment is still fermenting in the concentrated areas of futures and spot warehouses.

Supply Aspect

The old national standard