Stainless Steel Prices Pull Back, Costs Rise, Losses Widen, Weak Demand Loosens Cost Support [SMM Analysis]

This week, stainless steel spot prices pulled back, but production costs increased slightly, widening the losses for stainless steel mills. Taking 304 cold-rolled products as an example, based on the raw material prices of the day, the cash cost rose by about 30.68 yuan/mt this week, with the loss ratio reaching 6.37%. When calculated using the raw material inventory cost, the cash cost increased by about 159.74 yuan/mt, and the loss rate remained at 4.06%.

On the nickel-based raw material cost side, high-grade NPI prices ended their continuous rise since late July and dropped back slightly. Although the decline this week was relatively small, a downward trend has emerged. Despite being in the traditional September-October peak season for stainless steel consumption, downstream end-user recovery fell short of expectations, and spot transactions were sluggish. Coupled with the fading of macro tailwinds and weak market confidence, prices pulled back, increasing cost pressure on stainless steel mills. Furthermore, as mills had completed stockpiling of NPI raw materials for October, their willingness to purchase high-priced NPI weakened, leading high-grade NPI prices to retreat from highs. As of Friday, prices for 10-12% grade high-grade NPI were largely stable, finally settling at 954.5 yuan/mtu. In the stainless steel scrap market, the peak season performance was weak. Both stainless steel finished product prices and high-grade NPI prices declined, and stainless steel scrap prices also trended in the doldrums. Although the economic advantage of stainless steel scrap compared to high-grade NPI became more pronounced, it still failed to change the cautious purchasing mentality downstream. As of Friday, the price of 304 off-cuts in east China dropped slightly by 50 yuan/mt, with the latest offer around 9,700 yuan/mt.

On the chrome-based raw material cost side, high-carbon ferrochrome prices edged up slightly this week, but the momentum for further increases appeared insufficient. During the week, Tsingshan announced its October tender price for high-carbon ferrochrome, which was raised by 200 yuan/mt (50% metal content) MoM to 8,495 yuan/mt (50% metal content), largely in line with prior market expectations. Currently, spot retail prices and mill tender prices have converged to similar levels. Recently, despite the stainless steel peak season, market demand has been weak and transactions sluggish, leading to losses for stainless steel mills. Meanwhile, the tight supply situation in the high-carbon ferrochrome market has eased somewhat. Nevertheless, ferrochrome mills maintained relatively high smelting profits. Market sentiment for future price increases has weakened, and ferrochrome prices are expected to remain stable in the short term. As of Friday, high-carbon ferrochrome prices in Inner Mongolia increased slightly by 50 yuan/mt (50% metal content), finally settling at 8,550 yuan/mt (50% metal content).