Limited Fluctuations in Stainless Steel Prices and Costs During Off-Season, Steel Mill Profits Remain Basically Stable [SMM Analysis]

This week, stainless steel finished product prices remained stable. Production costs edged up slightly, but the increase was limited. Steel mills' overall smelting profits were basically stable. Based on 304 cold-rolled calculations, the profit margins this week were 2.01% based on current raw material costs and 2.15% based on inventory raw material costs. Stainless steel mills still retained certain smelting profits.

Nickel-based raw materials, this week high-grade NPI prices gained strength. Indonesian high-grade NPI shipments were disrupted, coupled with month-end restocking procurement by some stainless steel mills, along with the market's relatively optimistic expectations for forward NPI prices. Although mainstream stainless steel mills had sufficient NPI feedstock inventories and spot purchases remained weak, forward order transactions picked up significantly, driving prices higher. As of this Friday, the landed duty-paid price of Indonesian high-grade NPI with 10-12% nickel content in China rose 4 yuan/nickel unit to 1,136.5 yuan/nickel unit.

This week, stainless steel scrap prices remained stable, with limited impact from futures fluctuations and the slight recovery in NPI. Compared to NPI, the cost advantage of stainless steel scrap became more prominent, providing solid support for the price. Expectations of steel mill production resumptions in August also offered positive support. However, narrow profit margins at steel mills, combined with weak end-use demand and weak cost pass-through, significantly capped the upside room for prices. Overall, in the short term, stainless steel scrap will maintain a fluctuating trend supported by cost advantages and production resumption expectations, with limited overall upside room. As of this Friday, the price of mainstream 304 off-cuts in Shanghai rose 200 yuan/mt to 10,450 yuan/mt.

Chrome-based raw materials, this week high-carbon ferrochrome prices pulled back slightly. Although the market generally expected stainless steel production schedules to improve in August, high-carbon ferrochrome production remained at elevated levels, making the oversupply pattern hard to reverse. Driven by the decline in tender procurement volumes from mainstream stainless steel mills in August, spot high-carbon ferrochrome prices weakened slightly in tandem. However, chrome ore prices remained firm, and profit margins of ferrochrome producers have narrowed significantly, with some ferrochrome producers in south China already announcing plans for production cuts or shutdowns. As a result, the recent price decline has been relatively limited. As of this Friday, the mainstream high-carbon ferrochrome price in Inner Mongolia fell 50 yuan/mt (50% metal content) WoW to 8,075 yuan/mt (50% metal content).