Sluggish stainless steel demand leads to falling prices, while cost-price inversion at stainless steel mills remains difficult to reverse [SMM Analysis]

This week, the stainless steel market saw a simultaneous decline in production costs and spot prices. However, the drop in costs was smaller than that in spot prices, exacerbating the losses between production costs and selling prices. Taking 304 cold-rolled stainless steel as an example, based on the raw material prices of the day, the cash cost only increased slightly by 11.71 yuan/mt this week, with the loss ratio expanding to 5.77%. If calculated based on raw material inventory costs, although the cash cost decreased by 130.82 yuan/mt, the loss ratio still reached 5.43%.

Regarding the cost of nickel-based raw materials, the price of high-grade NPI had already fallen below the smelting cost line in Indonesia in the early stage, leaving limited room for further significant price reductions. Additionally, as Indonesia gradually enters the rainy season, the tight supply of nickel ore may intensify. Despite the fact that the loose supply situation of high-grade NPI is unlikely to change completely in the short term, driven by cost support and the demand for some traders to stock up at low prices, the price of high-grade NPI stopped falling and began to rebound this week. As of Friday, the price of high-grade NPI with a grade of 10-12% had increased by a cumulative 9.5 yuan/mtu, reaching 951 yuan/mtu. During the same period, the price of stainless steel scrap dropped slightly along with the price of finished stainless steel products. Compared with high-grade NPI, its economic efficiency was clearly at a disadvantage, with downstream purchase willingness remaining low and mainly driven by immediate needs. As of Friday, the price of 304 off-cuts in east China had fallen by a cumulative 50 yuan/mt, with the quoted price dropping to 9,950 yuan/mt.

In terms of the cost of chrome-based raw materials, the high-carbon ferrochrome tender price for June announced by Tsingshan Group was 8,095 yuan per 50 base tons, unchanged from the previous month, in line with market expectations. During the week, the retail spot price of ferrochrome continued to decline, gradually approaching the tender price. Currently, the retail price of high-carbon ferrochrome in Inner Mongolia is basically in line with the tender price. As south China enters the rainy season, the operating rate of ferrochrome enterprises has increased, leading to a significant rise in market supply and abundant spot cargo availability. Against the backdrop of the off-season for stainless steel consumption, losses in stainless steel enterprises, and planned production cuts, ferrochrome prices are expected to remain weak. Data shows that the price of high-carbon ferrochrome in Inner Mongolia fell by 25 yuan per 50 base tons this week, with the latest quoted price at 8,050 yuan per 50 base tons.

Overall, as the impact of macro factors on the stainless steel market gradually fades, the imbalance caused by insufficient demand has become increasingly prominent. Although stainless steel enterprises continue to face pressure from losses, relying solely on cost support is insufficient to reverse the weak market trend. Currently, news of production cuts by stainless steel mills has emerged in the market. Given the already ample supply of high-grade NPI and high-carbon ferrochrome, it is expected that the smelting cost of stainless steel will further decline.