In the Chinese market, nickel and stainless steel futures prices exhibited a pattern of rising first before falling in July. The introduction of China's "anti-involution" policies (aimed at preventing "rat race" competition in various industries) and the One Big Beautiful Bill Act in the United States (the largest tax cut in US history, which also expanded incentives for domestic manufacturing) significantly improved sentiment in the commodity markets. Nickel and stainless steel prices rose notably on this influence. However, as China's anti-involution policies had yet to materially impact the nickel and stainless steel industries by the end of July, the earlier positive market sentiment waned.
Source: Mysteel
A key backdrop for China's current round of anti-involution policies is weak domestic demand coupled with significant uncertainty in external demand, meaning the actual scale of surplus isn't particularly pronounced. Looking at domestic demand, since the real estate sector entered a downturn cycle, overall demand for ferrous metals has been in a state of negative growth. While external demand and overall consumption remained robust, they failed to offset the weakening domestic demand.
The actual situation for nickel and stainless steel differs somewhat from that of ferrous metals in China. Although demand in the property sectors has declined, infrastructure-related industries provided strong support for stainless steel demand. For instance, stainless steel still holds significant growth potential in industrial sectors like transportation (ships, railways), power facilities, machinery manufacturing, and nuclear power. Taking shipbuilding as an example, Mysteel projects global stainless steel demand in shipbuilding to grow at an annual rate of 5%-8% between 2025 and 2030. In H1 2025, China's domestic apparent consumption grew by 8.8% year-on-year, indicating robust overall domestic demand.
For the external demand, China's stainless steel exports grew by over 24% in 2024. However, significant uncertainty currently clouds the overall export outlook. For instance, the US imposing additional tariffs and India considering a provisional tariff of 15-25% on Chinese steel pose significant challenges for China's stainless steel exports.
Looking ahead to the August trends for nickel and stainless steel, Mysteel expects nickel prices to remain range-bound. Historically, within the industry, stainless steel production cuts have depended more on sector profitability than administrative directives. Furthermore, the overall ferrous metals market remains weaker than stainless steel, and the implementation of this round of anti-involution policies is a gradual process. This implies a low likelihood of these policies materially impacting the stainless steel industry in the near term. Consequently, Mysteel anticipates that stainless steel prices may exhibit an initial rise followed by a decline in the short term, with limited upside potential.
For the nickel market, the actual situation may differ from that of stainless steel. Although the global primary nickel market remains in surplus, the actual incremental supply in recent years has originated from Indonesia, while China is the world's largest nickel consumer. This means that if China's anti-involution policies yield tangible results, passive production cuts in stainless steel would lead to a significant decline in demand from nickel's largest consuming sector, potentially triggering a nickel price correction. However, as mentioned earlier, the transmission of these policies to the stainless steel industry is expected to be slow, thus alleviating near-term concerns over nickel consumption.
Written by Cora Ji, jiruyan@mysteel.com
