Stainless Steel Spot Prices and Costs Rise in Tandem, Steel Mill Profits Further Expand [SMM Analysis]

This week, stainless steel spot prices and production costs rose in tandem, further widening steel mills' profit margins. Taking 304 cold-rolled products as an example, based on the raw material prices of the day, the full cost profit margin rebounded to 1.12% this week; when calculated using the raw material inventory cost, it reached 8.2%.

On the nickel-based raw material cost side, high-grade NPI prices continued their upward trend this week. Against the backdrop of expectations for tightening nickel ore supply, rising nickel ore prices pushed up high-grade NPI costs. Coupled with the boost from rising futures, traders showed a strong willingness to hold prices firm. Although stainless steel mills had limited acceptance of the current high nickel-iron prices, resulting in overall subdued transactions, prices maintained a strong pattern. As of Friday this week, high-grade NPI with 10-12% grade rose by 25 yuan per mtu, settling at 1,042.5 yuan/mtu.

In the stainless steel scrap market, despite strong prices for both stainless steel finished products and high-grade NPI, stainless steel scrap prices overall held steady. Current prices are already at high levels, leading to downstream fear of high prices. Approaching the Chinese New Year holiday, stainless steel scrap traders actively sold to lock in profits and recoup funds, showing a strong willingness to sell. Although stainless steel scrap still holds a significant economic advantage compared to NPI, prices overall held steady. As of Friday this week, Shanghai 304 off-cuts prices held steady, with the latest offer around 9,750 yuan/mt.

On the chrome-based raw material cost side, high-carbon ferrochrome prices edged up this week. Boosted by continuously rising stainless steel prices, ferrochrome market sentiment improved. As the Chinese New Year approaches, stainless steel mills released pre-holiday stockpiling demand. Ferrochrome producers generally have orders scheduled until mid-to-late February, leading to tightening availability of retail material in the market. Additionally, chrome ore prices continued to rise on strong expectations, pushing up the cost center for ferrochrome and further supporting prices to hold steady at highs. As of Friday this week, high-carbon ferrochrome prices in Inner Mongolia rose 25 yuan/mt (50% metal content) WoW, settling at 8,450 yuan/mt (50% metal content).