1. Weak demand under the influence of overall excess production capacity

During 2010-2013, the annual growth rate of China's stainless steel production capacity maintained more than 10% growth. Industry supply growth continued to slow from 2013 to 2017, and stainless steel capacity returned to growth momentum after 2018.

In 2019, stainless steel crude steel capacity increased by 7.5% to 42.75 million tons, and there is still about 4.5 million tons of stainless steel capacity waiting to be put into production in the next 1-2 years. In recent years, China's stainless steel capacity utilization rate is maintained at less than 70%, overall excess capacity.

2. In 2020, the output of H1 stainless steel in China will be nearly 14 million tons, and the apparent consumption will exceed 10 million tons

In terms of output, China's stainless steel output grew rapidly from 2001 to 2019, reaching 5.3 million tons in 2006, surpassing Japan to become the world's largest stainless steel producer. At present, China's stainless steel production has accounted for more than 50% of the world's stainless steel production, established China's important position in the world stainless steel market.

In 2019, China's stainless steel output reached 29.4 million tons, up 10.09% year on year, and the growth rate further improved. By the end of the first half of 2020, China's stainless steel crude steel output was 13.961 million tons, which decreased by 393,100 tons, or 2.74%, compared with the same period in the first half of 2019.

Note: The output increased by 14.17% and 18.01% in 2012 and 2013.

The apparent consumption of stainless steel in China showed an overall growth trend from 2010 to 2019. In 2019, the apparent consumption of stainless steel in China increased by 12.8% year-on-year to 24.05 million tons, accounting for about half of the total global consumption.

Affected by the epidemic, China's apparent consumption of stainless steel in the first half of 2020 reached 11.6585 million tons, a year-on-year decrease of 270,500 tons, or 2.27%.

Note: Consumption increased by 15.66% in 2016.

3. China's stainless steel industry has strong agglomeration effect and high industry concentration

Over the years of development and the nature of the industry, China's stainless steel industry agglomeration effect continues to strengthen, currently relying on industrial agglomeration to form four major industrial clusters, including: Fujian, Guangdong, Guangxi and Wuxi. Among them, East China has complete industrial categories, with a large number of stainless steel processing and products industrial groups, stainless steel consumption and South China's neck and neck.

At present, China's stainless steel production capacity accounts for more than 50% of the global production capacity, and the industry concentration is high. By the end of 2019, the production share of the top ten enterprises in the stainless steel industry is as high as 81.08%. The overall competition is fierce, and with the centralized release of new steelmaking capacity in the future, the concentration of China's stainless steel industry will be further improved.

4. Controllable impact of the epidemic, new infrastructure and other factors boost the industry to maintain high demand
The new infrastructure mainly includes projects such as 5G network, artificial intelligence, industrial Internet, Internet of Things, UHV, charging piles for new energy vehicles and cold-chain logistics. In general, compared with the traditional "iron public base" direct pull, the new infrastructure demand for stainless steel direct quantity is down, but from the absolute demand, new infrastructure and other factors will boost the industry to maintain high demand.

At the same time, the old residential transformation, intelligent manufacturing, ocean engineering, rail transit, satellite and other advanced manufacturing development will also drive the demand for stainless steel. Medical equipment such as surgical tools, needles, medical auxiliary tools (cart) affected by the epidemic will also usher in the growth of demand, ordinary people consumption of kitchen electricity field, antibacterial stainless steel has been mentioned in the demand agenda.

Influenced by the epidemic and other factors, there will be considerable downward pressure on the macro economy in 2020, but the extent will be controllable. As the government gradually increase the intensity of investment in infrastructure, and to reduce the cost of financing and other measures to ensure macroeconomic stability under control level, 2020-2025 China's stainless steel production or will continue the high status of a few years ago, the demand of stainless steel under the condition of invariable will remain high fluctuated slightly, by 2025 China's stainless steel output and apparent consumption reached 40.29 million tons and 34.64 million tons respectively.