SMM Daily Comments (May 16): Most Base Metals Prices Closed with Losses, SHFE Nickel, Stainless Steel Plunge, Oil Gained on G7 New Measures, US Strategic Petroleum Reserve Replenishment and Supply Concerns

【SMM Analysis】Finished steel holds firm while raw materials diverge lower; stainless steel cost center shifts down and profits recover This week, stainless steel mills continued to push for lower raw material purchase prices, leading to marginal recovery in profitability and further easing of industry-wide losses. Based on 304 cold-rolled product calculations, mill profitability showed clear divergence this week: profit margin based on current raw material costs recovered to 1.53%, turning positive, while profit margin based on inventory raw material costs remained at -1.87%, dragged down by previously purchased high-priced raw material inventory. Overall profit pressure has eased but has not yet been fully cleared. Nickel-based raw materials extended their weak trend this week, though the pace of decline slowed significantly. With the National Day holiday approaching, downstream market trading was generally sluggish. Concerns over concentrated cargo arrivals after the holiday, combined with rising expectations for stainless steel production cuts and weakening demand expectations, put inventory accumulation pressure on NPI, keeping the overall market in the doldrums. However, supply disruptions in Indonesia due to water shortages and phased mill purchasing and restocking provided periodic support, effectively limiting NPI downside. As of this Friday, the delivered duty-paid price of Indonesian high-grade NPI with 10-12% nickel content in China edged down only 3 yuan per nickel unit to 1,045 yuan per nickel unit. Stainless steel scrap prices remained stable and consolidated this week. SHFE nickel futures weakened during the week, but SS futures held relatively firm, effectively underpinning stainless steel spot prices and providing support for the scrap market. On the fundamentals side, the weak pace of peak-season recovery and expectations for lower October mill production schedules capped scrap upside, but overall tight scrap supply, coupled with stainless steel scrap's stable cost advantage over NPI, effectively offset bearish demand factors...

[SMM Stainless Steel Scrap Market Weekly Review] Stainless Steel Finished Products Firm, Economic Advantage Supports, Stainless Steel Scrap Prices Stable This week, 304 stainless steel scrap off-cuts prices in east China remained flat, with a quotation range of 9,700-9,800 yuan/mt; in the Foshan area, 304 stainless steel scrap off-cuts prices also held steady, with a price range of 9,800-10,100 yuan/mt. From the perspective of raw material production costs, the cost of producing stainless steel entirely from stainless steel scrap is currently about 13,736.18 yuan/mt, while the cost of production entirely using high-grade NPI reaches 14,105.37 yuan/mt. Stainless steel scrap still maintains a stable economic substitution advantage over high-grade NPI, and its cost-supporting role continues to take effect. This week, stainless steel scrap prices overall maintained a stable operating pattern. During the week, SHFE nickel futures continued to weaken, but SS futures showed relatively firm performance without a notable follow-up decline, driving stainless steel spot prices to remain stable. On the raw material side, high-grade NPI and high-carbon ferrochrome prices continued to decline, effectively driving the recovery of steel mill smelting profits, continuously easing cost pressure on finished products, and keeping stainless steel scrap prices stable. The market has long faced tight invoice issues, but current stainless steel scrap circulating supply is generally tight, and the sustained economic advantage of scrap substitution effectively offsets some demand-side bearishness, supporting stable scrap prices. Overall, firm futures, weakening raw materials, and tight supply formed multiple supports, offsetting the demand-side bearishness brought by expectations for production cuts. At the current stage, the recovery strength of the September-October peak season is insufficient, overall market demand is weak, and expectations for a pullback in steel mill production schedules in October are rising...

[SMM Analysis] Peak Season Expectations Completely Fall Through as End-Use Demand Destocking Loses Steam; Stainless Steel Inventory Reverses Decline and Builds Up Again SMM, October 1: This week, stainless steel social inventory ended its previous trend of continuous destocking, with the overall inventory reversing from decline to buildup. The inventory center rose again, and the peak season destocking pace completely failed. Total inventory in the two core markets of Wuxi and Foshan moved upward, and industry inventory pressure became prominent once again. This week, expectations for a September-October peak season recovery in the stainless steel market were completely disproven. Persistent weakness in end-use demand and increased arrivals combined to push inventory from decline to growth. With the National Day holiday approaching, downstream end-user pre-holiday stockpiling largely wound down, and there was no new concentrated restocking demand in the market. End-users maintained only sporadic just-in-time procurement, and overall actual transaction volumes remained weak, sharply reducing destocking efficiency. Although SS futures showed firmness this week and spot prices remained broadly stable, with futures sentiment providing some support to the market, this could not offset the absence of end-use demand. Additionally, arrivals increased this week, with supply-side cargo releases proceeding steadily. Under the mismatch of weak demand and increased arrivals, the market returned to an inventory buildup trajectory. Overall, the complete failure of traditional peak season demand, subdued pre-holiday end-user transactions, and increased arrivals during the week were the core reasons for stainless steel inventory reversing from decline to buildup this week. Firm futures and spot prices could not reverse the inventory accumulation pressure. At this stage, the fundamentals for a stainless steel peak season recovery have completely failed, end-use demand recovery has fallen far short of expectations, and market trading sentiment remains persistently weak. In the short term, weak demand remains the core factor driving inventory trends, and end-user operations are halted during the long holiday...