Peak Season Expectations Dashed, Stainless Steel Finished Product Costs Fall Across the Board, Steel Mills Continue to Suffer Losses [SMM Analysis]

This week, finished stainless steel prices and production costs pulled back in tandem, leaving steel mills loss-making. Based on 304 cold-rolled calculations, this week’s profit margin was -0.37% based on current raw material costs and -0.98% based on inventory raw material costs.

On the nickel raw material side, high-grade NPI prices fell further this week. Expectations for a seasonal demand recovery in the stainless steel market failed to materialize. Coupled with lower SS futures and higher port inventories of high-grade NPI, market pessimism deepened further. Transactions remained weak; there were reports of 300-series production cuts at some stainless steel mills, and NPI prices remained in the doldrums overall. As of Friday, the landed duty-paid price in China for Indonesian high-grade NPI with 10-12% nickel content fell 5.5 yuan/nickel unit to 1,126 yuan/nickel unit.

Stainless steel scrap prices held steady this week. During the week, SS futures dipped lower, bearish sentiment spilled into the spot market, finished stainless steel and high-grade NPI weakened in tandem, and the overall market tone was bearish. Supported by its cost substitution advantage, stainless steel scrap found a floor and did not follow futures lower. However, cost support ultimately could not withstand fundamental pressure. Expectations for a “September-October peak season” recovery fell through, downstream demand was insufficient, steel mill margins narrowed, procurement attitudes remained cautious, market expectations for gains in September SS futures were subdued, and transactions were sluggish overall. With multiple bearish factors piling up, cost support continued to weaken. In the short term, stainless steel scrap lacks upward momentum, and the market is likely to remain weak. As of Friday, mainstream 304 stainless steel off-cut prices in Shanghai were flat at 10,300 yuan/mt on a tax-exclusive basis.

On the chrome raw material side, high-carbon ferrochrome prices pulled back slightly this week. During the week, TISCO and Tsingshan successively announced their September high-carbon ferrochrome procurement tender prices, down 100 yuan/mt (50% metal content) MoM, with current prices already below some high-carbon ferrochrome producers’ cost lines. Combined with elevated current high-carbon ferrochrome production and persistently weak stainless steel demand, the market remained broadly bearish on the outlook. As of Friday, mainstream high-carbon ferrochrome prices in Inner Mongolia fell 25 yuan/mt (50% metal content) WoW to 7,900 yuan/mt (50% metal content).