Stainless Steel Consumption Off-Season Coupled with Macro Disturbances: Prices and Costs Pull Back in Tandem, Steel Mill Profits Narrow [SMM Analysis]

This week, stainless steel prices and production costs both pulled back, slightly narrowing profit margins at steel mills. Using 304 cold-rolled coil as the benchmark, the profit margin calculated with current raw material costs was 2.23%, while the margin based on inventory costs was 1.31%.

On the nickel-based raw material cost side, high-grade NPI prices continued to pull back this week. Dragged by SHFE nickel price declines during the week and the increasing cost advantage of stainless steel scrap, stainless steel mills' expected production schedules weakened, their desire to bargain down prices intensified, and high-price transactions faced resistance, keeping high-grade NPI prices in the doldrums. As of this Friday, mainstream 10%-12% grade high-grade NPI rose 0.5 yuan per nickel unit, closing at 1,144 yuan/nickel unit.

In the stainless steel scrap market, prices held largely steady this week. The pullback in high-grade NPI prices weighed on the raw material side, making it difficult to push prices higher; however, a rebound in stainless steel futures and limited declines in finished product spot prices created an offsetting effect that supported prices. The industry has now entered the off-season for consumption, with steel mill production schedules and profits both declining. Coupled with rising uncertainties in the macro environment, bearish risks are gradually accumulating, and prices are expected to face downward pressure going forward. As of this Friday, mainstream 304 off-cuts in the Shanghai region rose by 100 yuan/mt to a latest quote of around 10,450 yuan/mt.

On the chrome-based raw material cost side, high-carbon ferrochrome prices edged down this week. Chrome ore port inventories were at historically high levels, and ore prices gradually pulled back, weakening cost support for high-carbon ferrochrome. Moreover, high-carbon ferrochrome producers still had profit margins, so production cuts were limited, and ample supply expectations persisted, leading to significant downward pressure on prices. As of this Friday, mainstream high-carbon ferrochrome prices in Inner Mongolia fell by 50 yuan/mt (50% metal content) WoW to 8,275 yuan/mt (50% metal content).