Cost Advantages Fail to Offset Macro Headwinds; Stainless Steel Scrap Prices Continue to Weaken and Pull Back [SMM Stainless Steel Scrap Market Weekly Review]

This week, 304 stainless steel scrap off-cuts prices in east China pulled back, with a quotation range of 9,700-9,800 yuan/mt; in Foshan, 304 stainless steel scrap off-cuts prices fell in tandem, with a price range of 9,800-10,100 yuan/mt. From a raw material cost perspective, the production cost of stainless steel using only stainless steel scrap is about 13,763.18 yuan/mt, while the cost using only high-grade NPI reaches 14,220.1 yuan/mt. The price spread between the two has widened further, and the economic substitution advantage of stainless steel scrap over high-grade NPI has strengthened again.

This week, stainless steel scrap prices were broadly in the doldrums. During the week, the US Fed's interest rate hikes continued to weigh on the market as a macro headwind. SS futures came under pressure and hit bottom, with bearish sentiment spreading quickly to the spot market, dragging spot prices of stainless steel products down in tandem. The pattern of synchronized declines in futures and spot markets was clear. Overall spot market sentiment remained weak. With steel mill profits under pressure, the desire to bargain down raw material prices was strong, and stainless steel scrap continued to fall steadily in line with product futures, with the price center shifting lower. Although the economic advantage of stainless steel scrap over the substitute raw material high-grade NPI widened again this week, strengthening cost support, macro headwinds and weak fundamentals resonated, making it difficult for cost positives to translate into market support.

Overall, the expanded cost advantages were insufficient to offset multiple bearish pressures. Current market expectations remained broadly weak. Affected by sluggish end-use demand and sustained drops in product prices, the September production schedule for stainless steel mills is expected to be revised down. Raw material demand from the production side contracted accordingly, steel mills' enthusiasm for purchasing stainless steel scrap cooled noticeably, and transactions in the market continued to decline. Under the combined bearish impact of the US Fed's rate hikes, futures hitting bottom, persistently weak spot prices, steel mills pushing for lower prices, and falling raw material demand, market pessimism is hard to repair. In summary, the weak market pattern is difficult to reverse in the short term. Even if cost advantages continue to expand, stainless steel scrap prices will likely remain in the doldrums.