This week, stainless steel continued to show a trend of weakening spot prices and production costs moving in tandem. Taking 304 cold-rolled products as an example, based on the raw material prices of the day, the cash cost decreased by 32.06 yuan/mt this week, with the loss ratio reaching 5.97%. If calculated based on the cost of raw material inventory, although the cash cost decreased by 48.84 yuan/mt, the loss ratio remained at 6.2%.
In terms of the cost of nickel-based raw materials, this week, the price of high-grade NPI continued to decline, significantly falling below the cost line of high-grade NPI producers, with some producers having expectations for production cuts. However, due to the off-season for stainless steel consumption, the pressure on stainless steel shipments has been increasing, with prices falling continuously to reach the lowest point in nearly five years, resulting in steel mills facing significant losses in transaction prices. A large domestic stainless steel mill further lowered its purchase price for high-grade NPI to as low as 910 yuan/mtu. Despite the subsequent news of a large stainless steel mill significantly cutting production, which led to a slight rebound in stainless steel finished product prices, the demand expectations for high-grade NPI still declined, and the price of high-grade NPI continued to be in the doldrums. As of Friday, the price of high-grade NPI with a grade of 10-12% had fallen by 8 yuan/mtu, ultimately closing at 913 yuan/mtu. In the stainless steel scrap market, the prices of high-grade NPI and stainless steel scrap fell simultaneously. Although stainless steel scrap still maintained a certain economic advantage, the gap between the two had become relatively small. As of Friday, the price of 304 off-cuts in east China had fallen by 100 yuan/mt, with the latest quote dropping to 9,350 yuan/mt.
In terms of the cost of chrome-based raw materials, this week, Tsingshan announced the tender price for high-carbon ferrochrome purchases in July, which remained unchanged from the previous month at 8,095 yuan/mt (50% metal content). This price significantly differed from the market's earlier expectation of a 300-500 yuan decrease. Despite the recent obvious decline in the retail price of high-carbon ferrochrome, with some transaction prices even falling below 7,700 yuan/mt (50% metal content), far lower than the steel mill tender price, and the overseas market futures price of chrome ore also loosening to $265/mt, resulting in a corresponding decrease in the smelting cost of high-carbon ferrochrome. Under the June steel mill tender price, ferrochrome producers had clearly maintained profits for chrome ore at $265/mt. However, in the current off-season for stainless steel consumption, with steel mills facing losses and expectations for production cuts, ferrochrome producers lacked confidence. Nevertheless, since March, with the significant increase in stainless steel production using high-carbon ferrochrome, a supply gap had emerged in the market. Coupled with the shutdown of multiple ferrochrome producers in South Africa since May and the recent continuous decline in the price of high-grade NPI, which had freed up cost space for high-carbon ferrochrome, the tender price for ferrochrome had been steadily announced out of consideration for ensuring raw material supply. As of Friday, the price of high-carbon ferrochrome in Inner Mongolia rose by 25 yuan/mt (50% metal content) this week, with the latest quote standing at 7,825 yuan/mt (50% metal content).
Overall, under the influence of the off-season for stainless steel consumption, price pressure has continued to transmit upwards. The supply surplus of stainless steel has led to a cost-price inversion for enterprises, making production cuts an inevitable choice. Meanwhile, the raw material sector is also under immense pressure, with prices continuously declining. However, despite the continuous decline in stainless steel prices, enterprises' losses have still not been alleviated due to the shipping pressure brought about by the supply surplus. In the later stage, the market still needs to wait for steel mills to cut production in order to gradually restore the supply-demand relationship.
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