Cost Advantages Fail to Halt Decline; Stainless Steel Scrap Prices Under Pressure and Pull Back [SMM Stainless Steel Scrap Market Weekly Review]

This week, 304 stainless steel scrap off-cuts prices in east China pulled back, with a quotation range of 10,050-10,150 yuan/mt; prices in the Foshan area fell in tandem, with a price range of 10,000-10,300 yuan/mt. From a raw material production cost perspective, the cost of producing stainless steel entirely from stainless steel scrap is currently about 14,185.33 yuan/mt, while the cost using only high-grade NPI reaches 14,730.06 yuan/mt. The two still maintain a large cost spread, and the substitution advantage of stainless steel scrap remains significant.

This week, stainless steel scrap prices consolidated lower overall. During the week, SS futures fell further and hit bottom, with bearish sentiment continuing to build and spilling over into the spot market, dragging spot prices of stainless steel finished products lower as well; the substitute raw material high-grade NPI also remained in the doldrums. Futures, finished steel, and raw materials formed a synchronized downward pattern, and overall market sentiment was bearish. Although stainless steel scrap still holds a significant economic advantage over high-grade NPI, stainless steel mills are currently facing losses in production costs, with profitability pressure coming to the fore. Mills have a strong desire to bargain down raw material prices and continued to push down stainless steel scrap market quotes, ultimately causing scrap prices to pull back this week.

Overall, the cost substitution advantage is insufficient to offset multiple bearish pressures from fundamentals. Although the market is currently in the traditional "September-October peak season" for consumption, actual downstream end-user consumption remains persistently weak, and expectations for a peak season recovery have completely failed to materialize, weakening overall market confidence. Dragged by demand, stainless steel mills' September production schedules have pulled back somewhat, and expectations for rigid demand for stainless steel scrap have weakened in tandem. At the same time, the industry's tight tax invoice issue continues to plague the market, further suppressing trading activity and liquidity. Under the combined bearish resonance of synchronized weakness in futures and spot, peak season demand falling short of expectations, mills' losses leading to price suppression, weakening rigid demand, and persistent industry pain points, bottom support for scrap is gradually weakening, and stainless steel scrap prices are expected to remain in the doldrums in the short term.