Off-Season Demand Is Weak and Raw Materials Are Firm, Stainless Steel Costs Rise and Profits Narrow [SMM Analysis]

This week, stainless steel production costs edged up slightly, while product prices remained largely stable, resulting in a slight narrowing of steel mill profits. Using 304 cold-rolled coil as the calculation benchmark, the profit margin was 2.16% based on current raw material costs and 1.44% based on inventory costs.

On the nickel-based raw material cost side, prices for high-grade NPI edged up this week. Although the market has entered the traditional consumption off-season for stainless steel—with weak end-use demand, low market confidence, and strong desire from steel mills to bargain down prices—production cuts for 300-series stainless steel in June were limited, leading to a relatively small decline in demand for high-grade NPI. Coupled with ongoing disruptions from news in Indonesia and the firm hold prices sentiment upstream, these factors jointly drove high-grade NPI prices to hold up well. As of this Friday, mainstream high-grade NPI with a grade of 10%-12% rose by 0.5 yuan per nickel unit, closing at 1,144 yuan per nickel unit.

In the stainless steel scrap market, scrap prices edged up this week. Driven by the spillover effect of firm finished steel product spot prices and the strength of high-grade NPI, scrap material prices rose in tandem. However, upward room was constrained by multiple bearish factors such as weak demand during the traditional off-season, tight tax invoice supply, and process limitations at steel mills. With bullish and bearish factors currently offsetting each other in the market, stainless steel scrap prices are expected to remain largely stable in the short term. As of this Friday, mainstream 304 off-cuts prices in Shanghai rose by 100 yuan/mt, with the latest quotation around 10,450 yuan/mt.

On the chrome-based raw material cost side, high-carbon ferrochrome prices remained stable this week. Although in the traditional consumption off-season for stainless steel, steel mills' June tender prices for high-carbon ferrochrome held steady, and overall production cuts at stainless steel mills were limited, with demand still maintained at a relatively high level. Recent purchases by steel mills, combined with power rationing news in Inner Mongolia, kept high-carbon ferrochrome prices largely stable. However, chrome ore inventories at ports remained at historically high levels, leading to sustained oversupply pressure and posing a pullback risk for high-carbon ferrochrome prices. As of this Friday, mainstream high-carbon ferrochrome prices in Inner Mongolia were flat WoW, closing at 8,325 yuan/mt (50% metal content).