Raw material prices generally pull back, unable to reverse the narrowing of stainless steel mill profits [SMM Analysis]

This week, stainless steel prices and production costs both moved lower, narrowing steel mill profit margins. Using 304 cold-rolled as the calculation benchmark, the profit margin based on current raw material costs was 1.71%, while that based on inventory raw material costs was 0.48%.

Cost side, for nickel-based raw materials, high-grade NPI prices pulled back this week. SS futures continued to pull back over the week, driving a sharp rise in cost pressure at China's stainless steel mills. Along with pessimistic market expectations for the outlook, a major stainless steel mill's low tender price for high-grade NPI dragged the market-wide psychological price level for purchases broadly lower. However, upstream suppliers still showed strong intentions to hold prices firm, creating clear divergence between upstream and downstream and leaving transactions sluggish. As of Friday, the landed cost, inclusive of tax, for Indonesian high-grade NPI with a grade of 10-12% fell by 6 yuan per nickel unit to close at 1,137 yuan/nickel unit.

In the stainless steel scrap market, scrap prices drifted lower this week. Dragged by the decline in SS futures and low high-grade NPI tender prices from steel mills, market sentiment turned broadly pessimistic. Steel mills adopted a cautious procurement stance, trading activity was insufficient, and the price center continued to shift lower. Although stainless steel scrap still holds an economic advantage over NPI, it failed to withstand the headwinds of weak end-use demand and pessimistic expectations. Under a convergence of bearish factors, cost support proved ineffective, and prices are likely to continue consolidating on a weak note in the near term. As of Friday, mainstream 304 off-cuts prices in Shanghai dropped by 250 yuan/mt to approximately 10,150 yuan/mt.

Cost side, for chrome-based raw materials, high-carbon ferrochrome prices held steady this week. After falling in the previous period, current retail ferrochrome prices have aligned with the July tender prices from major stainless steel mills. With overseas chrome ore prices remaining stable, and although market sentiment remains pessimistic about the outlook, participants are generally adopting a wait-and-see approach while holding prices steady. As of Friday, mainstream high-carbon ferrochrome prices in Inner Mongolia were unchanged WoW, closing at 8,100 yuan/mt (50% metal content).