Stainless steel prices fall slightly, rise with difficulty, masking losses; expectations for production cuts at steel mills persist amid weakening raw materials [SMM analysis]

This week, stainless steel continued to see a slight rise in spot prices, while production costs weakened further. Taking 304 cold-rolled products as an example, based on the raw material prices of the day, the cash cost decreased by 22.35 yuan/mt this week, with the loss ratio reaching 5.74%. If calculated based on the cost of raw material inventory, although the cash cost decreased by 53.39 yuan/mt, the loss ratio remained at 5.72%.

In terms of the cost of nickel-based raw materials, the price of high-grade NPI continued to decline this week. The price of nickel ore from the Philippines remained stable, while the premium for nickel ore from Indonesia slightly eased. However, the phenomenon of cost-price inversion at high-grade NPI plants remained difficult to reverse. As the stainless steel industry is in the traditional off-season, market demand is weak. Under the influence of expectations for production cuts, steel mills' demand for high-grade NPI further weakened, leading to a continued decline in the procurement price of high-grade NPI by steel mills during the week. As of Friday, the price of high-grade NPI with a grade of 10-12% had fallen by a cumulative 3.5 yuan/mtu, ending at 904 yuan/mtu. In the stainless steel scrap market, the supply of stainless steel scrap was tight, and prices remained largely stable. However, with the continuous decline in the price of high-grade NPI, the economic disadvantage of stainless steel scrap further widened. As of Friday, the price of 304 off-cuts in east China remained stable, with the latest quote dropping to 9,300 yuan/mt.

In terms of the cost of chrome-based raw materials, the price of high-carbon ferrochrome remained stable this week. As stainless steel consumption entered the off-season, stainless steel mills faced the dilemma of cost-price inversion. Despite the production halt at overseas ferrochrome producers leading to a gap in ferrochrome supply, the tender price of high-carbon ferrochrome for steel mills in July remained generally stable. However, the smelting profits of ferrochrome producers have now been restored, and their production enthusiasm is high. In addition, considering the expectations for production cuts at stainless steel mills, the future demand for ferrochrome may weaken. Currently, the market lacks confidence in maintaining high ferrochrome prices. Although prices have not yet shown a significant pullback due to the support of tender prices, the market is generally pessimistic about the tender price of ferrochrome for steel mills next month, expecting a price decline. As of Friday, the price of high-carbon ferrochrome in Inner Mongolia remained stable this week, with the latest quote being 7,850 yuan/mt (50% metal content).