Peak Season Expectations Hard to Boost Market, Stainless Steel Mill Cost-Price Inversion [SMM Analysis]

This week, stainless steel product prices and production costs pulled back simultaneously, and steel mills have fallen into losses on a cost-profit basis. Based on 304 cold-rolled calculations, the profit margin calculated using current raw materials this week was -0.11%, while that using inventory raw materials was -0.49%.

Nickel-bearing raw material side, high-grade NPI prices further declined and pulled back this week. Although the traditional September-October peak season is approaching, steel mills' peak season stockpiling had already been completed early. Coupled with the recent weakening of stainless steel prices, steel mill profit margins have been continuously narrowing, overall procurement activity remained sluggish, and compared with stainless steel scrap, high-grade NPI lacked cost advantages, with prices generally maintaining a weak trend. As of Friday this week, the landed duty-paid price of Indonesia high-grade NPI with 10-12% grade in China fell 4.5 yuan/nickel unit to 1,131.5 yuan/nickel unit.

This week, stainless steel scrap prices pulled back on a weak note, dragged by both the low-running SS futures and weakening high-grade NPI, leading to a synchronized decline in futures and spot markets. Although the peak season is approaching and steel mill production schedules are increasing, narrowing steel mill profits and cautious procurement attitudes, coupled with tax invoice issues disrupting the market, have rendered demand support ineffective. Under the confluence of multiple bearish factors, even stainless steel scrap's cost advantages cannot reverse the weak pattern, and the short-term market is expected to continue consolidating on a weak note. As of Friday this week, the ex-tax price of mainstream 304 off-cuts in Shanghai fell 150 yuan/mt to 10,300 yuan/mt.

Chrome-bearing raw material side, high-carbon ferrochrome prices held steady this week. Current high-carbon ferrochrome transactions remained sluggish, with market confidence in the outlook insufficient. However, the downtrend in chrome ore prices has officially reversed, with overseas market offers continuously firming up. Ferrochrome producers' profit margins have narrowed significantly, and some ferrochrome producers in south China have halted or cut production due to losses. Before the release of the new round of steel mill tenders, the market generally expects high-carbon ferrochrome prices to remain stable. As of Friday this week, the mainstream high-carbon ferrochrome price in Inner Mongolia held stable MoM at 7,925 yuan/mt (50% metal content).