Stainless Steel Costs Rise, Profits Narrow, Raw Material Market Diverges in Operation [SMM Analysis]

Stainless steel spot prices pulled back slightly this week, while production costs continued to rise, narrowing steel mills' profit margins. Taking 304 cold-rolled products as an example, the full cost profit margin calculated based on daily raw material prices dropped to 0.61% this week; when calculated using raw material inventory costs, it reached 7.22%.

On the cost side for nickel-based raw materials, high-grade NPI prices continued to rise this week, but the pace of increase slowed down. Although NPI producers and traders maintained a strong willingness to hold prices firm, demand pulled back due to maintenance at downstream stainless steel mills during the Chinese New Year period. Combined with weak end-user transactions and low acceptance of high-priced raw materials, trading activity was sluggish, and the upward momentum for NPI prices paused. As of Friday this week, high-grade NPI with 10-12% grade rose by 11.5 yuan per mtu, closing at 1,054 yuan/mtu.

In the stainless steel scrap market, stainless steel finished product prices edged down slightly, but prices of alternative raw materials, high-grade NPI and high-carbon ferrochrome, continued to climb. Influenced by this, stainless steel scrap prices overall held steady. With the Chinese New Year approaching, fund repatriation needs dominated traders' operations, and most scrap yards showed a significantly stronger willingness to sell. Some regional yards halted purchases early for year-end closing. The economic advantage of stainless steel scrap over high-grade NPI remained prominent, and steel mills maintained a steady procurement pace, with transactions supported by rigid demand not shrinking significantly. As of Friday this week, Shanghai 304 off-cuts prices held firm, with the latest offer around 9,750 yuan/mt.

On the cost side for chromium-based raw materials, high-carbon ferrochrome prices rose slightly this week. Despite high production levels of high-carbon ferrochrome, pre-holiday stockpiling demand from steel mills towards year-end provided a boost, leading to tight availability of tradable spot cargo in the market. Ferrochrome producers showed a strong willingness to hold prices firm. Additionally, chrome ore prices increased against the backdrop of high ferrochrome output, good producer margins, and expectations of production resumptions in South Africa, further strengthening cost support. As of Friday this week, high-carbon ferrochrome prices in Inner Mongolia rose by 100 yuan/mt (50% metal content) WoW, closing at 8,550 yuan/mt (50% metal content).