Shanghai stainless steel futures settled below the 15,000 yuan per tonne level for the fourth straight session on Wednesday as concerns persisted over high inventory and weak demand in top producer China. The front-month February 2020 stainless steel contract on the Shanghai Futures Exchange closed at 14,930 yuan ($2,132.43) a tonne, little changed from Tuesday's settlement price of 14,925 yuan.
The benchmark contract has declined 4.2% from its base price of 15,585 yuan set when it began trading on September 25. "Stainless steel inventory in China continued to hover at record-high level," said Helen Lau, a metals and mining analyst at Argonaut Securities.
With plentiful supply and weak demand, she said many stainless steel producers were making losses, except those with integrated nickel pig iron (NPI) plants. Chinese stainless steel producers mainly use NPI, a low-grade ferronickel and cheaper alternative to pure nickel, as feedstock.
"Further weakness in stainless steel prices will lead to more producers halting production," Lau said. "Reduced stainless steel production and price consolidations are headwinds for nickel prices." Other Shanghai steel futures rose but ended off the day's highs, with construction material rebar up 1.3%, extending gains as China's policymakers ratcheted up support for the slowing economy.
On Tuesday, China's central bank cut the interest rate on its one-year medium-term lending facility loans for the first time since early 2016. "Property developers face strong downward pressures and we may see more credit defaults ahead despite ongoing policy easing/stimulus measures," Nomura analysts said in a note.
Shanghai hot-rolled coil edged up 1.0 percent The most-traded iron ore on the Dalian Commodity Exchange gained 0.7% amid reports that some emergency restrictions on steel production have ended, although spot prices continued to weaken. Benchmark spot 62% iron ore cargoes slumped to $83.50 a tonne on Tuesday, SteelHome consultancy data showed, closing in on levels seen before the Jan. 25 mine tailings dam burst in Brazil, which sparked a five-month rally in prices.
Dalian coking coal slipped 0.2%, after Tuesday's rise due to market chatter about China imposing fresh import curbs on the steelmaking raw material. Coke edged down 0.1 percent. China's seaborne coal imports slumped 19% in October from September, but the world's top buyer is still on track to record an annual increase, says Reuters columnist Clyde Russel, citing vessel-tracking and port data compiled by Refinitiv.
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