Indonesia Maritime and Investment Coordination Department confirmed that Indonesias export tariff on nickel downstream semi-finished products (NPI) will take effect this year. Xia Yingying, metal analyst of Nanhua Futures, told the reporter of Futures Daily that NPI (ferronickel) is the raw material for stainless steel production. In 2021, China will rely on Indonesias ferronickel imports by about 57%. As of September this year, as Chinese enterprises have put their projects into production in Indonesia, Indonesias ferronickel production has increased by 28.8% year-on-year, Chinas ferronickel imports have increased by 38% year-on-year, and the import dependence has risen to 63%. If Indonesias tariff policy on ferronickel is implemented this year, the cost of importing ferronickel will rise, thus raising the production cost of stainless steel.



In addition, Xia Yingying also said that the strike incident at the South African port had not been resolved, which restricted the transportation of chrome ore, another raw material for stainless steel production, and to some extent increased the markets concern about the supply of raw materials.



"The South African trade union rejected the proposal of the state-owned Transnet to raise wages and vowed to continue the strike. The strike paralyzed South Africas railway and port networks. About 80% of Chinas chrome ore imports came from South Africa, and the strike led to the postponement of the shipment of most chrome ore ships. The disturbance of the supply of chrome ore brought about the expectation of domestic ferrochrome shortage, corresponding to the expectation of increased stainless steel costs and reduced production." Xu Keyuan, the head of the metal group of Guangzhou Futures, told reporters that, however, the current rise in the price of stainless steel is more driven by emotion, and the strike in South Africa has not yet had a substantial impact.



In addition to the news factors, Xia Yingying said that the market sentiment on Friday was relieved in stages, and the nonferrous metal plate was in the rising market as a whole, which also provided space for the fermentation of stainless steel news.



"Recently, the US inflation in September continued to exceed expectations, but the market had fully responded to the US Federal Reserves interest rate increase of 75BP in November. After the release of the US Federal Reserves inflation data in September this month, risk assets rose sharply. On Friday, stainless steel prices rose sharply driven by the macro." Li Yaoyao, a non-ferrous researcher of Xinhu Futures, said.



The reporter learned that since the middle and late August, the stainless steel inventory has continued to decline and dropped to a historical low point in the same period, and the stainless steel price has also risen to a high in recent months. This is mainly because the completion data of domestic real estate in August has been substantially restored, which is close to the level of the same period last year. The acceleration of real estate completion has led to the recovery of stainless steel consumption. In September, the stainless steel price maintained a high range oscillation trend.



At present, Yang Lina, the leader of Founder Medium term Futures Nonferrous Precious Metals, told reporters that the current cost support of stainless steel is strong. In addition to the news from Indonesia, from the domestic perspective, the price of nickel pig iron at the cost end of stainless steel has stabilized and recovered. The domestic integrated stainless steel chemical plant is facing production. The main domestic producers of nickel pig iron stock up, and the price of nickel pig iron has risen in stages. According to the data, the pre-sale stainless steel price of major domestic private stainless steel manufacturers in November increased by 100 yuan/ton compared with October.



"In addition, Chinas foreign trade orders for stainless steel have rebounded, overseas stainless steel plants have reduced production due to accidents and energy factors, while domestic plants have increased production and foreign trade supply, or transfer orders have increased. However, it is expected that overseas stainless steel plants that stopped production due to accidents will recover from October to November." Yang Lina said.



From the current fundamentals of stainless steel, most market participants believe that the overall supply of stainless steel is weak.



In terms of supply, Li Yaoyao told the reporter that after the stainless steel price rose in September, the profits of the steel plant improved, the overlapping demand was repaired, and the output of the steel plant increased. The domestic crude stainless steel output in that month increased by 6% year on year, of which the 300 series increased by 8% year on year. The survey shows that the production schedule of steel plants will continue to rise in October. It is expected that the production schedule of domestic stainless steel rough steel in October will increase by 11.9% month on month, 22.3% year on year. Among them, 300 series increased by 10.2% month on month and 18.7% year on year.



In terms of demand, Xia Yingying believes that the demand side of stainless steel has not seen a significant improvement, and the current transaction is dominated by rigid demand. After the early price drop and pre holiday stock preparation, the downstream staged replenishment is completed. Data shows that on October 13, the social inventory of stainless steel in the national mainstream market was 724200 tons, down 0.41% on a weekly basis and up 3.91% year on year.



"In the short term, the downstream of stainless steel may continue to maintain regular stock, mainly with low inventory operation, and the subsequent stainless steel fundamentals are still under pressure. Among them, the new capacity of stainless steel at home and abroad will be gradually put in, and the capacity will gradually climb by the end of the year, and the overall supply will gradually increase. The domestic demand side is still affected by the weakening of real estate, the weakening of international market and foreign demand, and the space for demand expansion remains to be observed, and the demand will generally weaken in the fourth quarter." Yang Lina said that, on the whole, under the expectation that the stainless steel production schedule continues to increase but the demand has not improved significantly, the market inventory pressure and market arrival situation should be comprehensively considered in the future.



Looking ahead to the future, Li Yaoyao believes that the stainless steel price may be stronger in the short term driven by the macro, but the upward space is limited. Later, with the accumulation of stainless steel, the stainless steel price will return to the weak operation. However, at present, the profit of the steel plant is still low, and the bottom cost support of the stainless steel price still exists. In the fourth quarter, it is expected that the overall stainless steel price will fluctuate in an interval.



"We believe that the strong stainless steel oscillation will continue temporarily, but the degree of space recovery may be limited. In the future, attention should be paid to the fluctuation rhythm and macro factors of nickel, while the supply and demand side of stainless steel can focus on the acceptance of the spot market for the price rise and the change of the basis. At present, stainless steel has cost support under it and supply pressure above it, which may show a wide oscillation pattern. Whether the subsequent Indonesian nickel product export policy is implemented or not and the tax rate adopted And confirmation method will also affect the range of range changes. " Yang Lina said.



In Xia Yingyings view, the stainless steel supply in the fourth quarter of this year is expected to be looser than that in the third quarter. The uncertainty on the supply side lies in the rising cost of imported ferronickel caused by Indonesias tariff policy, which further extends to the impact on stainless steel production cost; The demand side may hardly increase in the fourth quarter. From a macro perspective, although there is a staged pressure relief, the Federal Reserve still maintains a hawkish attitude towards monetary policy against the background of high global inflation. Based on the macro and fundamental factors, it is estimated that the stainless steel in the fourth quarter is still dominated by pressure oscillation, and the Indonesian tariff policy is an important risk point.