Futures market drives spot cargo prices up, and the losses in stainless steel sector are gradually being resolved [SMM analysis]

This week, stainless steel spot prices rose slightly, but with the decline in production costs, the extent of the stainless steel mills' inverted margins narrowed, though they remained inverted. Taking 304 cold-rolled products as an example, based on the raw material prices of the day, the cash cost fell by 137.31 yuan/mt this week, with the loss ratio reaching 3.6%. If calculated based on the cost of raw material inventory, although the cash cost fell by 140.73 yuan/mt, the loss ratio remained at 1.76%.

In terms of nickel raw material costs, this week, the price of high-grade NPI continued to rise strongly. High-grade NPI smelters still faced the situation of inverted cost-price margins, so the price of high-grade NPI remained firmly supported by costs. However, nickel ore prices pulled back further, and the cost of nickel raw materials for integrated stainless steel mills producing their own nickel iron significantly declined. Recently, with the strengthening of stainless steel prices and the failure of stainless steel mills to meet production cut expectations within the month, it is expected that production may further increase in August, and high-grade NPI producers generally hold a bullish attitude. As of Friday, the price of high-grade NPI with 10-12% grade had risen by a cumulative 2.5 yuan/mtu, ending at 912 yuan/mtu. In the stainless steel scrap market, as the price of finished stainless steel products rose further, the supply of stainless steel scrap was already tight. However, despite the continued strong performance of stainless steel scrap prices, it remained economically inferior compared to high-grade NPI. As of Friday, the price of 304 off-cuts in east China held steady, with the latest quotation reaching 9,650 yuan/mt.

In terms of chrome raw material costs, despite TISCO and Tsingshan successively announcing the August high-carbon ferrochrome steel tender prices last week, which were down by 100-200 yuan/mt (50% metal content) MoM from the previous month, the prices were still higher than the current retail prices, and the decline in steel tenders did not meet expectations. In addition, the cost of chrome ore arriving at ports has risen recently. Against the backdrop of high production schedules for ferrochrome, the retail supply of chrome ore from traders has tightened. Meanwhile, coke prices continued to climb driven by macro tailwinds, leading to an overall increase in ferrochrome costs and a tentative rise in market retail quotations. Currently, ferrochrome producers still maintain a certain level of profitability, with high production enthusiasm, and the previous supply gap has been partially filled. Coupled with the recent strengthening of the stainless steel market driven by macro policies, its subsequent sustainability remains uncertain, and the market generally holds a cautious wait-and-see attitude, which to some extent restricts the further rise in ferrochrome prices. As of Friday, the price of high-carbon ferrochrome in Inner Mongolia rose by 50 yuan/mt (50% metal content) this week, with the latest quotation reaching 7,900 yuan/mt (50% metal content).