Trading chaos in stainless steel market
Created date: 2022-01-17

Under the background of the continuous rise in the price of stainless steel, some upstream steel mills have serious breach of contract, such as long-term default, changing the performance mode or forced matching sales. Many middle and downstream enterprises are forced to accept the unreasonable clause that "only by purchasing a large amount of spot at a high price can some of the low price futures signed earlier be withdrawn". This kind of forced matching sales behavior of "1 kg lean meat must be matched with 3 kg fat meat" has the potential to spread, resulting in some stainless steel enterprises "going out of the pot without rice" in the short term, and some downstream manufacturing enterprises, construction sites and contractors even face the dilemma of shutdown.

 

Refusing to perform the contract due to the rise of market price, the steel plant forces matching sales

 

"The phenomenon of wanton breach of contract in the stainless steel market is becoming more and more serious, which is mainly reflected in that some upstream steel mills do not deliver to customers according to the contract. What's more, they force customers to accept 'unequal contracts', which makes many middle and downstream manufacturers in the stainless steel industry miserable." The person in charge of Guangdong stainless steel materials and Products Association said. For example, he said, some steel mills have delayed the performance of the low-price futures contracts signed earlier, and there have also been acts such as selling the spot at a high price, matching the delivery at a high price with a low price (the low-price futures reserved in the contract must be matched with some high-price spot), delaying the delivery of the contract, changing the agreement, etc., which have seriously affected the agents of steel mills in the middle reaches Production and operation of market traders and some downstream terminal manufacturing enterprises.

 

"At present, most contracts have been overdue for several months, and even the implementation progress of futures contracts of most enterprises in January 2021 is only about 20%, and a large number of contracts expiring in February and March (more than 50000 tons of contract volume) have not yet been implemented." from mid January 2021, metal products Co., Ltd. began to notify all enterprises if they want to accelerate contract delivery, The spot delivery futures contract must be purchased. If 400 tons of futures are delivered, 1200 tons of spot must be purchased. "It's equivalent to buying 1 kg of lean meat with 3 kg of fat." At the same time, due to the failure to complete the contract, the contract guarantee of many enterprises has been occupied by steel mills for a long time. According to professionals, tens of millions of contract deposits of its affiliated companies have not been recovered.

 

Coincidentally, Wuxi, another domestic stainless steel distribution center, is also performing the same situation.

 

Wuxi stainless steel processing and Circulation Association said that after the Spring Festival in 2021, Wuxi stainless steel market experienced a roller coaster market, with a rise and fall of 2000-2500 yuan / ton in just half a month. When prices rise, the excuses of some steel mills are "shortage of goods, slow delivery, closing of offer, breach of contract", etc. Some steel mills put forward requirements such as "first delivery of goods at high prices", "matching delivery at high and low prices", "delayed delivery contract" and even "change of agreement".

 

According to the analysis of the relevant person in charge of Wuxi stainless steel processing and Circulation Association, the domestic stainless steel production enterprises mainly focus on the agent system and agreement system. The agents hate dishonest steel mills. However, for fear of losing the supply of goods, they often can only passively accept unreasonable terms. Such things happen from time to time in the stainless steel circle.