China’s Jinhai to Halt Stainless Steel Output Amid High Costs and Weak Demand

Jinhai

China’s Jinhai, a prominent stainless steel producer in Guangxi province, has announced plans to suspend its melt shop production from January 1 for approximately 1 ½ months. This decision follows mounting production costs and weak downstream demand in the domestic market.

Production Halt Details

Jinhai, which operates a melt shop with an annual capacity of 1 million tons, produced around 900,000 tons of stainless steel in 2023, primarily using stainless scrap as its feedstock. The suspension of operations will impact production levels, contributing to an expected decrease in China’s total stainless steel output for the January-February period.

As of Q3 2023, Jinhai accounted for approximately 226,000 tons of China’s overall stainless steel production of 9.92 million tons. The company’s temporary shutdown follows broader industry challenges, including thinner profit margins and the threat of potential losses, particularly among producers in Guangxi and Zhejiang provinces.

Market Outlook and Impact

With production cuts becoming more common across various regions, the stainless steel industry is bracing for a downturn, particularly in light of the upcoming Lunar New Year holiday, which is expected to reduce market activity significantly. The Chinese market is forecast to see a reduction of around 300,000 tons in total stainless steel output during January and February. This will likely have a ripple effect on related markets, including feedstock prices for nickel pig iron and ferrochrome.

In the coming months, market participants are monitoring the situation closely, as production halts like Jinhai’s and soft demand are expected to weigh heavily on pricing dynamics across multiple sectors.