Stainless Steel Spot Prices and Costs Decline in Tandem, Steel Mills' Cost-Price Inversion Difficult to Reverse [SMM Analysis]

This week, stainless steel spot prices and production costs both weakened and declined, while the extent of losses at stainless steel mills remained largely stable. Taking 304 cold-rolled products as an example, based on the raw material prices of the day, the cash cost decreased by approximately 102.29 yuan/mt this week, with the loss ratio reaching 5.74%. When calculated using the raw material inventory cost, the cash cost decreased by approximately 138.31 yuan/mt, and the loss rate remained at 7.09%.

On the nickel-based raw material cost side, high-grade NPI prices weakened further this week. Due to losses at stainless steel mills, sluggish demand in the stainless steel market, persistent pessimism regarding the market outlook, the significant economic disadvantage of high-grade NPI compared to stainless steel scrap, and still relatively ample nickel-based raw material reserves at steel mills, trading volume for high-grade NPI was low recently amid a tug-of-war between longs and shorts. Influenced by traders' needs to sell goods for cash flow, their psychological price level gradually softened, and NPI prices potentially faced further declines later. As of Friday, the price for high-grade NPI with 10-12% grade fell by 10.5 yuan/mtu, finally settling at 905.5 yuan/mtu. In the stainless steel scrap market, entering the year-end off-season, the overall stainless steel market showed weakness, and expectations for production cuts at steel mills strengthened further. Concurrently, prices for high-grade NPI and high-carbon ferrochrome remained on a downward trend. Furthermore, the issue of tight tax invoices for stainless steel scrap remained unresolved. Although stainless steel scrap maintained a significant economic advantage over high-grade NPI, its price still struggled to reverse the weak trend. As of Friday, the price for 304 off-cuts in east China fell by 50 yuan/mt, with the latest offer around 9,150 yuan/mt.

On the chrome-based raw material cost side, high-carbon ferrochrome prices continued to pull back this week. During the week, spot prices for chrome ore fell further, and the fourth round of coke price reductions was implemented, further reducing the production cost of high-carbon ferrochrome. Although ferrochrome prices also declined, production profits were still maintained. Ferrochrome producers' willingness to produce did not diminish; abundant precipitation in Sichuan limited the increase in parity hydropower costs, and new production lines commenced operation or were converted in Inner Mongolia during the month, keeping domestic high-carbon ferrochrome production at high levels. However, with stainless steel mills already incurring losses, weak stainless steel demand during the market off-season, and the alleviation of tight ferrochrome supply, high-carbon ferrochrome prices struggled to sustain high levels and are expected to gradually pull back in the future. As of Friday, the price for high-carbon ferrochrome in Inner Mongolia fell by 75 yuan/mt (50% metal content), finally settling at 8,075 yuan/mt (50% metal content).