China drives global stainless steel production growth

China registered a double-digit percentage rise in stainless steel production to ensure that global melt shop output rose by 2.5% year-to-date in the first nine months of 2023.

Data published by the non-profit organisation, the World Stainless Association, indicated that Chinese mills produced 26.6 million tonnes of material in the period from January to September last year – an increase of 13.4% on the same period in 2022. This resulted in a total global production of 42.6m tonnes during the period. 

MEPS International’s research shows that, despite its production growth, China was one of few countries assessed to register price increases between December and January. This was despite the country’s ongoing property crisis, which is suppressing demand from the construction sector. 

Declining output 

Research partners indicated that European mills were reducing prices in an effort to fill their order books in January. Elevated interest rates are among the factors subduing demand, particularly from the construction sector. Reports of financial difficulties at several businesses within Europe’s stainless steel supply chain are on the rise. 

Production volumes declined in key markets across the globe as mills reduced their output in response to the decline in demand during 2023. 

The data for January to September showed that stainless steel production in Europe declined by 8%, to 4.4m tonnes, and by 12.9% in the United States, to 1.4m tonnes. The contribution of Asian countries, excluding China and South Korea, declined by 12.4%, to 4.9m tonnes. The ‘others’ category – made up of Brazil, Russia, South Africa, South Korea and Indonesia – declined by 13.2%, to 5.3m tonnes. 

According to data published by the China Special Steel Enterprises Association, China’s crude stainless steel production grew by an estimated 12.6%, to around 36m tonnes, in 2023. The increase was delivered despite a capacity utilisation rate of approximately 70%, highlighting potential overcapacity issues. 

China’s stainless steel exports shrunk by 8.6% to 3.8m tonnes in the first 11 months of last year, according to data published by the General Administration of Customs of China this month. 

The export data indicates how the country’s stainless steel producers have adapted to mitigate the impact of weak economic growth in key markets during 2023. In the January to November period, Chinese exports to the EU fell by 64% to around 140,000 tonnes; those to the US dropped by 24.3% to 80,000 tonnes. 

Exports to Russia, meanwhile, rose by 30% to 277,733 in the same period. According to worldsteel data, China’s stainless steel exports to Russia have risen by 94% since 2020. 

Increased export costs 

Rising shipping costs will join antidumping duties as a key influence on China’s choice of export destinations in 2024. Houthi rebels’ attacks on cargo vessels in the Red Sea have forced shipping companies destined for the Suez Canal into a detour of almost 12,000 nautical miles. The new route takes vessels travelling from Singapore to Europe around South Africa’s Cape of Good Hope. 

The enforced change has significantly increased transport costs. Drewry’s World Container Index of January 25 indicated that transport costs had risen to USD3,964 per 40-foot container, an increase of 94% on the same week in 2023. The figure is also 179% more than the average 2019 (pre-pandemic) rate of USD1,420. 

The rising cost of transporting raw materials will be of concern to many stainless steel producers. However, China’s trade ties with the major nickel mining countries of Indonesia and Russia, and its own molybdenum sources, mean that it is well-placed to mitigate its effect on production growth. 

• This content first appeared in the January edition of MEPS International's Stainless Steel Review. The monthly report provides subscribers with steel prices, indices, market commentary and forecasts from across the globe.