[SMM analysis] stainless steel profit analysis-profit value is negative, stainless steel plant will repair and reduce production?

SMM, April 2: according to the accumulation of SMM data, the profit value of 304stainless steel has fallen below the break-even line since mid-March. As of April 1, the loss of stainless steel is 423.57 yuan / ton, in the form of negative profit value. Is the stainless steel enterprise ready for maintenance and production reduction? SMM brings you exclusive analysis.

Source: SMM unit: CNY / t

According to SMM statistics and analysis, 2016 is a year of serious losses for Chinese stainless steel enterprises. Except for May, the first half of 2016 was below the break-even line, and turned into a profit in November. The highest profit value reached 2276 yuan / ton in September 2017. with the continuous release of the capacity of 3 series stainless steel, the output of 3 series stainless steel increased by 5.7% to 1.184 million tons in September compared with the same period last year, but the growth rate of downstream demand was slow and the profit value of stainless steel gradually narrowed. In the first half of 2018, most stainless steel enterprises are in the state of cost upside down, and some enterprises choose to overhaul and reduce production from August to September. Since late October 2018, the stainless steel market has weakened, the price has retreated, and the profits of steel enterprises have fallen back.

After 2019, stainless steel began a wave of rise, mainly stimulated by downstream replenishment demand, coupled with cost support 3 series prices all the way up, in the middle and late March, 3 series stainless steel prices continued to fall, according to SMM research, downstream demand recovery is not as expected, The consumption of hot rolling is better than that of cold rolling, which stimulates some steel mills to increase the output of three series hot rolling, based on the fact that there are more goods in the market, the demand of downstream is limited, and the transaction is general.

Normal distribution of average profit in stainless steel industry:

Source: SMM unit: CNY / t

According to the normal distribution map of average profit of stainless steel industry from 2016 to 2019, in the past three years, the profit value of stainless steel is in the range of-501-314 yuan / ton for 90 days, and the profit of stainless steel is in the range of 248.22-435.63 yuan / ton for another 91 days. According to the analysis of SMM data, the profit value of stainless steel is in the loss of 300 yuan / ton in the past week, and the profit value of about 50 days in the past three years is in this range, while the extreme state of negative profit value is in the range of-1438.48 yuan / ton to-688.84 yuan / ton.

Average profit margin of stainless steel industry:

Source: SMM

According to the date distribution map of the average profit margin of the stainless steel industry from 2016 to 2019, the normal loss of stainless steel is between 2% and 4%, and it has been in this range for about 111 days in the past three years, according to SMM data. Since the middle of March, the loss of stainless steel has been between 1% and 2%, which has not reached the historical extreme state. Under this profit level, the stainless steel plant still maintains normal production.

Average cost of stainless steel enterprises:

Source: SMM unit: CNY / t

According to the average cost distribution map of stainless steel enterprises, the centralized price range of stainless steel hot rolling cost is 10000 yuan / ton-13000 yuan / ton and 14000 yuan / ton. The profit value is concentrated in the range of-500yuan / ton-1000 yuan / ton. According to the SMM data, the hot rolling cost of stainless steel is concentrated in the range of 13850 yuan / ton-13924 yuan / ton in the past two weeks, and the profit value is from-50 yuan / ton to-423yuan / ton.

Generally speaking, at present, for stainless steel plants, costs and stainless steel profits are in the normal range, stainless steel plants will not reduce production and maintenance. According to SMM research, the recovery of downstream demand is slow and the social inventory is high, which is still an important factor restricting the upward price of stainless steel.

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