The Decline in Raw Material Prices Fails to Reverse the Downtrend, Stainless Steel Costs and Selling Prices Remain Inverted [SMM Analysis]

This week, the production cost of 304 stainless steel continued its downward trend, with prices of key furnace charges such as nickel, chromium, and stainless steel scrap declining simultaneously, driving the cost center to move lower.

On the nickel cost side, high-grade NPI prices continued to fall. Although the current price has already fallen below the cost line of some smelters, due to the low price of stainless steel products, stainless steel producers themselves are also facing losses, thus maintaining a strong desire to bargain down raw material prices. As of Friday, the price of 10-12% high-grade NPI had cumulatively dropped by 16 yuan/mtu, finally settling at 970 yuan/mtu. The price of stainless steel scrap pulled back slightly following the decline in stainless steel product prices, but it still holds a significant economic advantage over high-grade NPI, giving stainless steel companies using short-process technology a certain competitive edge on the cost side. Taking east China as an example, the price of 304 off-cuts dropped by 200 yuan/mt this week, with the latest offer around 9,650 yuan/mt.

On the chromium cost side, Tsingshan Group announced the tender price for high-carbon ferrochrome in May this week, which rose by 500 yuan/50 base mt MoM to 8,095 yuan/50 base mt, slightly higher than previous market expectations. However, the retail market price had already increased earlier and was higher than this tender price. Coupled with the continued decline in stainless steel product prices, companies' losses have worsened, and market participants in the ferrochrome sector lack confidence in further price increases. After the tender price rose, the retail market price remained largely stable. Specifically, the price of high-carbon ferrochrome in Inner Mongolia dropped by 100 yuan/50 base mt this week, with the current offer around 8,250 yuan/50 base mt.

Currently, the decline in stainless steel spot prices exceeds the reduction in costs, leading to an expansion in companies' losses. Taking 304 cold-rolled as an example, based on the day's raw material prices, the cash cost dropped by 157 yuan/mt this week, but the loss margin widened to 7.45%. If calculated based on raw material inventory costs, the cash cost actually increased by 124 yuan/mt, with a loss rate of 6.96%. Looking ahead to next week, as raw material prices may decline further while stainless steel product prices are already at relatively low levels, the room for further deep declines is limited. It is expected that the situation of cost and selling price inversion for stainless steel companies will improve to some extent.