Limited Fluctuations in Stainless Steel Prices and Costs During Off-Season, Steel Mill Profits Remain Basically Stable [SMM Analysis]

This week, stainless steel product prices remained stable. Production costs edged up slightly, but the increase was limited, and overall smelting profits at steel mills were basically stable. Based on 304 cold-rolled coil, the profit margin calculated using current raw materials was 2.01% this week, and using inventory raw materials was 2.15%. Stainless steel mills still retained some smelting profits.

Nickel raw materials side, high-grade NPI prices strengthened this week. Although mainstream stainless steel mills had sufficient NPI raw material inventory and spot purchases remained weak, disrupted shipments of Indonesian high-grade NPI, combined with month-end restocking purchases by some stainless steel mills, plus optimistic market expectations for forward NPI prices, led to a notable recovery in forward order transactions, driving prices higher. As of this Friday, the delivered tax-inclusive price of Indonesian high-grade NPI with 10-12% grade in China rose by 4 yuan/nickel unit to 1,136.5 yuan/nickel unit.

Stainless steel scrap prices remained stable this week, with limited impact from futures consolidation and a slight NPI recovery. Compared with nickel pig iron, the cost advantage of stainless steel scrap was further highlighted, providing solid support for its price floor; expectations of production resumptions at steel mills in August also lent support. However, narrow profit margins at steel mills, coupled with weak end-use demand and difficulty in cost transmission, significantly suppressed the upside room for prices. Overall, in the short term, stainless steel scrap is expected to maintain a fluctuating trend supported by cost advantages and production resumption expectations, with overall upside room limited. As of this Friday, the price of mainstream 304 off-cuts in Shanghai rose by 200 yuan/mt to 10,450 yuan/mt.

Chrome raw materials side, high-carbon ferrochrome prices pulled back slightly this week. Although the market generally expected stainless steel production schedules to increase in August, high-carbon ferrochrome output remained high, making the loose supply situation difficult to reverse. Driven by a pullback in tender procurement volumes from mainstream stainless steel mills in August, spot prices of high-carbon ferrochrome weakened slightly in tandem. However, chrome ore prices stayed firm, and profit margins of ferrochrome producers had narrowed significantly, with some ferrochrome producers in south China already reporting plans for production cuts or stoppages. Therefore, the recent price decline was relatively limited. As of this Friday, the mainstream high-carbon ferrochrome price in Inner Mongolia fell by 50 yuan/mt (50% metal content) WoW to 8,025 yuan/mt (50% metal content).