Nickel Ore News Boosts Nickel Costs, Stainless Steel Mills' Profits Narrow Further [SMM Analysis]

This week, stainless steel spot prices remained stable, but production costs increased, further narrowing the profit margins of stainless steel mills. Taking 304 cold-rolled products as an example, based on the raw material prices of the day, the full cost profit margin fell to -0.58% this week; if calculated using the cost of raw material inventory, the margin reached 1.78%.

On the cost side for nickel-based raw materials, SHFE nickel futures were driven higher mid-week by news of nickel mine approvals in Indonesia; high-grade NPI rose in tandem with the movement in SHFE nickel futures and expectations of tight nickel ore supply, which revived trading activity in the market as the Chinese New Year holiday approached—even though stainless steel mills had largely completed their procurement and stockpiling, traders held strong bullish sentiment. As of Friday this week, the price of high-grade NPI with 10-12% grade increased by 21.5 yuan per mtu, settling at 1,051.5 yuan/mtu.

In the stainless steel scrap market, with the Chinese New Year holiday approaching, trading at scrapyards gradually halted as merchants closed for the holiday, leading to a complete suspension of market activity and stable prices. Although stainless steel scrap holds an economic advantage over high-grade NPI, this advantage has not yet translated into price movements; although SS futures strengthened on news related to Indonesian nickel mines, the impact on the stainless steel scrap market was limited. Trading in February is expected to remain stagnant, with the key focus after the holiday being the pace of demand recovery; the market overall maintains optimistic expectations. As of Friday this week, the price of 304 off-cuts in Shanghai remained steady, with the latest offer around 9,650 yuan/mt.

On the cost side for chromium-based raw materials, high-carbon ferrochrome prices continued their stable trend this week. As the Chinese New Year holiday approached, most stainless steel mills had completed their stockpiling, and trading of high-carbon ferrochrome essentially stalled; given that current prices are already at high levels, they are expected to remain stable before the holiday. As of Friday this week, the price of high-carbon ferrochrome in Inner Mongolia held steady WoW, settling at 8,550 yuan/mt (50% metal content).