High-Grade NPI Prices Continue to Pull Back, Narrowing Losses for Stainless Steel Mills [SMM Analysis]

This week, stainless steel spot prices and production costs both weakened and declined, narrowing the losses for stainless steel mills further. Taking 304 cold-rolled products as an example, based on the day's raw material prices, the cash cost decreased by approximately 58.12 yuan/mt this week, with the loss ratio reaching 5.27%; when calculated using raw material inventory costs, the cash cost decreased by approximately 125.96 yuan/mt, and the loss rate remained at 6.4%.

On the nickel-based raw material cost side, high-grade NPI prices fell further this week. After a major stainless steel mill's tender price of 880 yuan/mtu was announced last week, market sentiment was already pessimistic and bearish. Although stainless steel prices saw some recovery during the week due to macro tailwinds, this failed to reverse the weakening downtrend in high-grade NPI. Transaction prices quickly moved lower and, amid market pessimism, further declines were expected. However, recent news of production cuts at stainless steel mills involved relatively little 300-series stainless steel, and domestic NPI producers were already operating at a loss. Current prices have reached the cost line for Indonesian NPI, leaving relatively small downside room. As of Friday, the price for high-grade NPI with 10-12% grade fell by 8 yuan/mtu, settling at 882.5 yuan/mtu. In the stainless steel scrap market, while stainless steel finished products and high-carbon ferrochrome prices strengthened during the week, high-grade NPI maintained its downward trend. Stainless steel scrap prices had fallen to their lowest level since 2020. However, given that stainless steel scrap still holds a significant economic advantage over high-grade NPI, the decline in scrap prices paused, with prices holding steady during the week. As of Friday, the price for 304 off-cuts in east China remained stable, with the latest offer around 9,000 yuan/mt.

On the chrome-based raw material cost side, high-carbon ferrochrome prices saw a slight increase this week. Following the announcement of Tsingshan's relatively high steel mill tender price for high-carbon ferrochrome for December and the strengthening of stainless steel prices during the week due to macro tailwinds, confidence in the ferrochrome market improved, repairing the previously pessimistic and bearish sentiment. Although actual transactions were not ideal, offers from ferrochrome producers edged higher. However, with frequent news of production cuts at stainless steel mills, expectations of a pullback in stainless steel production due to the year-end off-season, and consecutive declines in chrome ore spot prices leading to a lower cost center for ferrochrome, profit margins for ferrochrome producers have increased further, creating some room for price concessions. Given that stainless steel mills are already operating at a loss, it is unlikely they will maintain high tender prices for ferrochrome in the future. As of Friday, the price for high-carbon ferrochrome in Inner Mongolia rose by 25 yuan/mt (50% metal content), settling at 8,025 yuan/mt (50% metal content).