2026-03-06
In late February and early March, the geopolitical conflict in the Middle East escalated sharply, which directly affected the global commodity market: oil and non-ferrous metals showed significant price fluctuations. In addition, Indonesia's nickel ore policy sent conflicting signals. The country's Ministry of Energy has set the target nickel production volume for 2026 at 209 million tons, which is almost 20% lower than already approved quotas. However, the Indonesian Mining Association said a revision of the RKAB document is planned in July, which could result in quotas being increased by 30% to meet the needs of smelters. Uncertainty in policy expectations has caused significant market volatility.
After the holiday period, spot quotations of 304 grade cold-rolled stainless steel in the Wuxi market generally increased. The growth was driven by a combination of sentiment associated with investors shifting to defensive assets and increased support from the cost side. The escalation of the conflict in the Middle East directly affects global energy supplies and the safety of maritime transport. Risks to shipping through the Strait of Hormuz have increased, fueling concerns about possible disruptions in global supply chains. At the same time, government procurement for infrastructure projects is increasing in the Middle East, leading to increased demand for stainless steel. In addition, in an effort to reduce dependence on the oil economy, countries in the region are actively developing petrochemical industries, seawater desalination projects and other industries, which contributes to the steady demand for corrosion-resistant stainless steel pipes. Thanks to its unique geographical location as a link between Asia and Europe, as well as the support of regional trade agreements, Chinese stainless steel producers are actively exploring new markets in the Belt and Road Initiative countries. Over the past two years, Chinese stainless steel exports to the Middle East market have grown significantly.
The Strait of Hormuz occupies a strategically important position. It is not only a key shipping route for the Persian Gulf, but also a major transport hub for the supply of Chinese stainless steel to Saudi Arabia, the UAE, Iraq, Kuwait and other countries in the region. If cross-strait shipping is restricted, export routes will be disrupted, which could lead to higher transportation costs and a decrease in the competitiveness of Chinese products in foreign markets. The ongoing impact of Indonesian policies is primarily reflected in the cost of stainless steel production. The Indonesian Ministry of Energy and Mineral Resources' proposed target for nickel ore production of 209 million tonnes in 2026 has generated widespread market interest. Although this figure represents only an indicative estimate and does not affect the fulfillment of already approved RKAB quotas of 260-270 million tonnes, in conditions of increased market sensitivity, it has increased expectations of supply shortages. Due to the discrepancy between the target production volumes and those already approved quotas The Indonesian Nickel Mining Association predicts that the updated RKAB will be approved in July 2026, and the nickel mining quota could be increased by 30%. In the short term, expectations of quota expansion have a negative psychological impact on the market. However, in the long term, repeated policy changes only increase expectations of tightening supply, creating sustainable price support in the market.
Overall, the key factors driving the stainless steel market remain rising costs and a post-holiday demand recovery. On the cost side, Indonesia's controversial nickel ore policy continues to fuel expectations of long-term supply constraints, so the cost support factor remains relevant. In addition, the recent escalation of the US-Iran conflict has led to rising shipping and energy costs, which further increases the cost of importing raw materials, including chrome ore. As a result, the baseline cost of stainless steel production may continue to rise. In the medium to long term, special attention should be paid to the production rates of steel plants, the dynamics of inventory reduction, as well as further developments in the geopolitical situation.
