The gap between rising stainless steel prices and falling costs narrows; expectations for production cuts at steel mills, with further expectations for a decline in chromium and nickel raw materials [SMM Analysis]

This week, stainless steel continued to show a slight rise in spot prices, but production costs weakened further, narrowing the inversion margin for stainless steel mills. Taking 304 cold-rolled products as an example, based on the raw material prices of the day, the cash cost this week decreased by 11.09 yuan/mt, with the loss ratio reaching 5.29%. If calculated based on the cost of raw material inventory, although the cash cost decreased by 124.17 yuan/mt, the loss ratio remained at 4.34%.

In terms of the cost of nickel-based raw materials, the price of high-grade NPI continued to show a downward trend this week, but the recent price decline had slowed down. Despite the recent loosening of nickel ore prices, most high-grade NPI producers still faced the dilemma of cost-price inversion, leading them to gradually adopt measures such as production cuts and switching to other products, resulting in a decrease in supply. However, the stainless steel industry had not yet shaken off the impact of the off-season, and the production cuts by stainless steel mills had weakened the demand for high-grade NPI simultaneously. Stainless steel mills had a low acceptance of high prices, and under the influence of market games, the price of high-grade NPI still showed a slight drop. By Friday, the price of high-grade NPI with a grade of 10-12% had fallen by 4 yuan/mtu, closing at 900 yuan/mtu. In the stainless steel scrap market, the supply of stainless steel scrap was tight, and it slightly followed the rise in stainless steel finished product prices during the week, further widening the economic disadvantage of stainless steel scrap. By Friday, the price of 304 off-cuts in east China remained stable, with the latest quote rising to 9,500 yuan/mt.

In terms of the cost of chrome-based raw materials, the price of high-carbon ferrochrome continued to remain stable this week. As time gradually approached month-end, market confidence was already low, and there was a bearish attitude towards the steel tender prices for the next month, leading to a cooling in ferrochrome market transactions and an increasingly strong wait-and-see attitude towards the steel tender prices for the next month. The flat steel tender prices in July and the pullback in chrome ore futures prices had left a profit margin for ferrochrome producers, boosting their production enthusiasm. With the end of factors such as environmental protection checks, supply had increased. However, downstream stainless steel mills expected production cuts, and the bearish sentiment towards the steel tender prices for August in the ferrochrome market had become mainstream. Under the dual impact of pessimistic expectations and weakened demand, it was expected that ferrochrome prices would show a weakening trend. By 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).