Stainless steel price faces difficulty in rising; stainless steel mills continue to suffer losses [SMM analysis]

This week, stainless steel continued to show a weakening trend in both spot prices and production costs. Taking 304 cold-rolled products as an example, based on the raw material prices of the day, the cash cost decreased by 13.06 yuan/mt this week, with the loss ratio reaching 6.08%. If calculated based on the cost of raw material inventory, although the cash cost decreased by 7 yuan/mt, the loss ratio remained at 6.53%.

In terms of the cost of nickel-based raw materials, the price of high-grade NPI continued to show a downward trend this week. Despite the continued firmness of nickel ore prices, leading to increasingly severe losses for nickel iron smelters and resistance to further price declines for high-grade NPI, the rate of decline has slowed down. However, influenced by expectations for production cuts at stainless steel mills, the market's demand expectations for high-grade NPI have gradually weakened. Additionally, stainless steel mills are still experiencing losses, with low acceptance of high-priced raw materials and low enthusiasm for market purchases. It is expected that in the short term, the price of high-grade NPI will remain weak. As of Friday, the price of high-grade NPI with a grade of 10-12% has cumulatively fallen by 5.5 yuan/mtu, ending at 907.5 yuan/mtu. In the stainless steel scrap market, the supply of stainless steel scrap is tight, and prices are largely stable. However, with the continuous decline in the price of high-grade NPI, the economic viability of stainless steel scrap has been lost again. As of Friday, the price of 304 off-cuts in east China remained stable, with the latest quote dropping to 9,350 yuan/mt.

In terms of the cost of chrome-based raw materials, TISCO announced a tender price of 7,845 yuan/mt (50% metal content) for high-carbon ferrochrome procurement in July this week, a decrease of 50 yuan MoM, and a difference emerged again compared to the tender price of Tsingshan. After the announcement of Tsingshan's tender price last week, the high-carbon ferrochrome market strengthened briefly, but the increase in spot transaction prices was limited. Currently, the overseas market futures price of chrome ore is stable at $265/mt, with low market transaction activity. Given the current weak stainless steel consumption, losses at steel mills, and expectations for production cuts, the market holds a bearish outlook for the future demand of ferrochrome. Additionally, as ferrochrome producers still retain profit margins, it is difficult for the price of high-carbon ferrochrome to remain at high levels. As of Friday, the price of high-carbon ferrochrome in Inner Mongolia increased by 25 yuan/mt (50% metal content) this week, with the latest quote reaching 7,850 yuan/mt (50% metal content).