Stainless Steel Costs and Prices Pull Back Synchronously, Steel Mill Profits Remain Basically Stable [SMM Analysis]

This week, stainless steel prices and production costs fell in tandem, while steel mill profit margins remained basically stable. Using 304 cold rolling as the calculation benchmark, the profit rate based on current raw material costs was 2.07%, and the profit rate based on inventory raw material costs was 1.33%.

On the nickel-based raw material cost side, high-grade NPI prices trended downward and pulled back this week. During the week, SHFE nickel and SS futures remained largely in the doldrums. Although the market widely expected a tight supply of high-grade NPI, and upstream smelters and traders maintained firm offers, the expected pullback in stainless steel production schedules led to weaker demand. Coupled with declining stainless steel prices, the market’s acceptance of high-priced cargoes was very limited, and transactions remained sluggish. As of this Friday, mainstream high-grade NPI with 10%-12% nickel content declined by 8 yuan per nickel unit, closing at 1,133 yuan per nickel unit.

In the stainless steel scrap market, scrap prices pulled back slightly this week. Weakness in the futures market transmitted to spot prices, and amid the industry off-season with sluggish demand and reduced steel mill production schedules, rigid demand weakened further. Although steel scrap has a cost advantage over NPI, providing floor support for prices, uncertainty over Indonesian policies kept the market largely on the sidelines. Under the pressure of bearish fundamentals, stainless steel scrap prices are expected to continue consolidating at weak levels in the short term. As of this Friday, the price of mainstream 304 off-cuts in Shanghai fell by 100 yuan/mt, with the latest quotation at around 10,400 yuan/mt.

On the chrome-based raw material cost side, high-carbon ferrochrome prices continued to edge down this week. Production of high-carbon ferrochrome remained high, and port inventories of chrome ore continued to surge, fueling growing expectations of oversupply. Combined with the seasonal stainless steel demand downturn leading to lowered production schedules and reduced demand, transactions for ferrochrome remained weak, and prices continued to edge down. As of this Friday, mainstream high-carbon ferrochrome prices in Inner Mongolia fell by 50 yuan/mt (50% metal content) WoW, closing at 8,100 yuan/mt (50% metal content).