Recovering Supply and Weak Demand Weighed on the Stainless Steel Prices, Profits Are Likely to Shrink Further

The spot and futures prices of stainless steel dropped simultaneously last week. The prices of 304 cold-rolled coils (burr edge) dropped by 950 yuan/mt on the week, and the prices of 304 hot-rolled coils declined by 350 yuan/mt amid the sluggish spot transactions.

The guide prices of stainless steel futures released by Tsingshan Group showed that the prices of 304 cold-rolled products fell by 800-900 yuan/mt, the base price of Hongwang 304 cold-rolled products was 19,700 yuan/mt, and the base price of Yongjin products stood at 20,500 yuan/mt.

The spot prices fell along, and the traders lowered the prices amid the sluggish transactions. But the downstream users were wait-and-see and the market was largely bearish, which also weighed on the stainless steel prices.

The supply of cold-rolled products was sufficient last week, while that of hot-rolled products was relatively tight, which supported the hot-rolled product prices at the same level with the cold rolled product prices. The market participants are generally bearish over the stainless steel prices in the traditional off season. The stainless steel prices are unlikely to rebound amid the expectations of production resumption and lower costs. The support at the break-even point is worth attention.

The stainless steel prices dropped sharply, while the prices of high-grade NPI and high-carbon ferrochrome stood stable. Based on the intraday raw material prices, the profits of stainless steel fell significantly to around 757 yuan/mt based on full costs, and the profits stood at 833 yuan/mt based on the costs of raw material inventories. The stainless steel prices are expected to fall further amid weakened demand and bearish expectations, while the price decline of high-grade NPI will be limited. The profits of stainless steel are expected to continue to shrink.