Overview of The Development of Stainless Steel Industry In China

Stainless steel is the abbreviation of stainless steel and acid-resistant steel. In the fields of metallurgy and materials science, based on the main performance characteristics of steel, a series of iron-based alloys that contain more than 10.5% chromium and less than 1.2% carbon content, and have corrosion resistance and stainlessness as their main properties are called stainless steel. Usually, steel types that are stainless and corrosion-resistant in less corrosive media such as atmosphere, water vapor, and fresh water are called stainless steel; steel types that are corrosion-resistant in highly corrosive environments such as acids, alkalis, and salts are called acid-resistant steel. 

Classification

There are four main ways to classify stainless steel:

1.According to the structural characteristics, it can be divided into martensitic steel, ferritic steel, austenitic steel, duplex stainless steel and precipitation hardening stainless steel.
2.According to the main chemical composition, it can be divided into chromium stainless steel, chromium-nickel stainless steel and chromium-manganese-nitrogen stainless steel.
3.According to the use, it can be divided into nitric acid-resistant stainless steel, sulfuric acid-resistant stainless steel, seawater-resistant stainless steel and other varieties.
4.According to the functional characteristics, it can be divided into non-magnetic stainless steel, easy-cut stainless steel, low-temperature stainless steel, high-strength stainless steel and other varieties.

Industry Development History of Stainless Steel

The development history of China's stainless steel industry can be summarized into four stages:

1.The initial phase(1952-1979):

At this stage, the demand for stainless steel is mainly for cutting-edge use in industry and national defense, and the annual output of stainless steel in China is very small.

2.Budding phase(1980-1999):

The national focus shifted to modernization. By 1999, apparent consumption of stainless steel in China increased significantly to 1.53 million tons, while output was still only 300,000 tons.

3.Rapid development phase(2000-2020):

In 2010, China's stainless steel export volume exceeded its import volume for the first time, with a net export volume of 470,000 tons, realizing the role transformation from a net importer of stainless steel to a net exporter. Since 2010, China's stainless steel crude steel production has maintained a relatively stable growth, and its proportion of global stainless steel production has continued to increase. As of 2020, China's crude stainless steel production accounts for 59% of global production. Private steel mills represented by Qingshan and Delong have risen rapidly. With costs significantly reduced, China's standing in the international market goes up significantly, and both output and consumption of stainless steel in China have maintained high levels.

4.Transformation phase(2021-Now):

After 2020, the growth rate of China's stainless steel production and consumption has slowed down significantly. On the one hand, the global mid-to-low-end stainless steel market is becoming increasingly saturated, and China’s production capacity in high-end stainless steel manufacturing cannot meet domestic demand. On the other hand, the government has introduced relevant policies to more strictly manage and regulate the self-built production capacity and total emissions of steel companies.

Industry Market Size Status Quo

A surge in market size was caused in 2021, mainly by global inflation and significant increase in raw material prices, driving up prices in the stainless steel industry. The market size of China's stainless steel industry in 2021 was 416 billion yuan. In 2022, due to the fall in stainless steel prices and the decline in apparent consumption, the market size declined, reaching 342 billion yuan. At present, Cr-Ni steel (300 series) stainless steel products dominate China, accounting for nearly half of the output of stainless steel in China. It has a wide range of uses and is widely used in the manufacturing of household appliances, delivery and other living appliances. It is also an absolute mainstay in the field of industrial equipment manufacturing in extreme environments.

In 2022, China's apparent stainless steel consumption was 27.57 million tons, a year-on-year decrease of 341,000 tons, or 1.22%. The apparent consumption of stainless steel in China in the first quarter of 2023 was 6.9736 million tons, a year-on-year decrease of 67,900 tons or 0.96%. In terms of statistical data in the past two years, most of the demand for stainless steel is still in the metal products and mechanical engineering fields, accounting for 66.2% in total, followed by construction facilities, accounting for 12.2%. Consumption in other fields is relatively low, indicating that the stainless steel industry market is still highly dependent on the consumer goods industry, equipment manufacturing industry, and construction industry.

From the perspective of supply and demand, China's stainless steel industry is in a state of oversupply. However, as the country takes measures on the supply side, the industry's supply growth has slowed down. At the same time, the gap between supply and demand is expected to narrow after downstream demand picks up. 

Industry competition landscape

The stainless steel industry in China has high policy and technical barriers, and the entry threshold for the industry is relatively high. Four major clusters have been formed in Fujian, Guangdong, Guangxi, and Wuxi, Jiangsu. Private giants are on the rise. Private steel mills account for more than 50% of domestic crude steel production capacity. The top ten companies in the industry include Tsingshan, Baowu Taiyuan Steel, Beibu Gulf New Materials, Jiangsu Delong, etc., accounting for 81%. In the future, a new stainless steel pattern will be formed with the three giants Tsingshan, Baowu and Delong as the industry leaders, and the market share will continue to increase.

Fujian is the largest province in terms of stainless steel industry in China. The representative enterprise Qingshan Group has developed rapidly, surpassing the old stainless steel leader Taiyuan Stainless Steel and becoming the largest private stainless steel giant. It is the absolute benchmark in the stainless steel industry in China, with market dominance and profitability as well as terminal direct sales capabilities. Baowu Group has built a steel plant with the richest stainless steel varieties and specifications in the world. It has merged with the old state-owned stainless steel giant Taigang Group to expand its scale, striving to optimize the self-sufficiency rate of raw materials, and increasing competitiveness. Delonghi Group focuses on the development of 300 series stainless steel, and maximizes the production cost advantage of 300 series through the extension of the upstream and downstream industrial chains and the rapid development of scale.

From the perspective of the overall market structure of stainless steel industry in China, both  small and medium-sized stainless steel companies and leading stainless steel companies have been affected by the downward cycle of the steel market, and their profitability has deteriorated compared with the same period last year. However, leading stainless steel companies have strong ability to resist risks and their losses are still relatively controllable. The overall market competition pattern is stable, and the ranking of leading companies of stainless steel in China has not changed much. We look forward to a recovery in large-scale production capacity and output after the overall market recovers. In particular, the trend of mergers and cooperation among leading steel companies is intensifying, and major groups have joint reconstruction projects and capacity transfer, as reorganization plans. Especially with the formation of “Baowutai Enterprise Cluster”, the head effect and scale effect of the stainless steel industry will be more significant.