Stainless Steel Cost Inflated amid Still Rising LME Nickel

SHANGHAI, Mar 24 (SMM) - In the production cost of stainless steel, nickel-based raw materials account for an average of about 60%, and ferrochrome accounts for about 20%. But according to the current prices of raw materials, the proportion of nickel has risen to about 67%, while chrome-based raw materials take up around 18%. Therefore, the nickel price hikes have a great impact on the cost of stainless steel.

Among the nickel-based raw materials, the main sources include high-grade NPI, stainless steel scrap, ferronickel and pure nickel. The highest proportion is taken by high-grade NPI, which accounts for an average of over 60% of nickel sources, and 70% or more with integrated steel mills. This is followed by stainless steel scrap, whose proportion has been rising due to its cost efficiency.

Since March when nickel prices rose sharply, the prices of nickel-based raw materials including high-grade NPI, stainless steel scrap and Ferronickel have also been rising. High-grade NPI are traded at 1700-1800 yuan/mtu, while the prices of scrap have added 1,000 yuan/mt over that in February. Ferronickel, on the other, could not even enter China amid historical increase of LME nickel and great import losses.

Rising raw material prices have heightened the cost of stainless steel. According to SMM model, the cost of 304 cold rolled coil for integrated stainless steel mills is around 19,200 yuan/mt based on intraday raw material prices, and the profit stands at over 1,000 yuan/mt based on the current market prices of 304 coil. However, after nickel prices gradually return to rational, it is expected that nickel-based raw material prices will fall and the cost will also drop from the current.