Market Confidence Insufficient as Stainless Steel Underperforms in Peak Season, Raw Material Prices Ease [SMM Analysis]

In the first week after the holiday, stainless steel spot prices rose slightly, but production costs pulled back, narrowing 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 this week dropped by about 11.71 yuan/mt, reducing the loss ratio to 6.37%; if calculated using the raw material inventory cost, the cash cost increased by about 23.33 yuan/mt, and the loss rate remained at 4.7%.

On the nickel-based raw material cost side, the high-grade NPI market continued the pessimistic sentiment from before the holiday, with prices weakening further. Before the National Day and Mid-Autumn Festival holidays, most stainless steel mills had completed stockpiling, leading to reduced recent procurement demand. Additionally, stainless steel underperformed in the peak season, making it difficult for prices to rise. Recent cost-price inversion for stainless steel limited mills' acceptance of high-priced raw materials. Moreover, after the previous consecutive strength in high-grade NPI prices, losses for Indonesian NPI producers had already been repaired, resulting in overall weak market sentiment. As of Friday, the price of high-grade NPI (10-12% grade) dropped back slightly, finally settling at 953.5 yuan/mtu. In the stainless steel scrap market, tight tax invoices for stainless steel scrap, combined with the continued weak performance of high-grade NPI prices recently, led to insufficient market confidence, and stainless steel scrap prices also trended weakly. Although the economic advantage of stainless steel scrap compared to high-grade NPI became more prominent, against the backdrop of stainless steel's underperformance in the peak season and overall weakness in raw material prices, stainless steel scrap prices are still unlikely to rise in the short term. As of Friday, the price of 304 off-cuts in east China dropped slightly by 50 yuan/mt, with the latest offer around 9,650 yuan/mt.

On the chrome-based raw material cost side, high-carbon ferrochrome prices held steady after the holiday. Although stainless steel underperformed in the peak season and stainless steel mills were already facing losses, ferrochrome producers maintained good profits, with production sustained at around 800,000 mt. The previous tightness in the ferrochrome market had significantly eased, and market bullish sentiment had waned. However, Tsingshan's October tender price for high-carbon ferrochrome was announced before the holiday, rising by 200 yuan/mt (50% metal content), in line with previous market expectations. Additionally, stainless steel production in October is expected to remain at high levels, keeping ferrochrome demand steady, providing support. Thus, high-carbon ferrochrome prices are not expected to pull back significantly in the short term. As of Friday, high-carbon ferrochrome prices in Inner Mongolia held steady, finally settling at 8,550 yuan/mt (50% metal content).