Finished steel and raw materials pull back in tandem; stainless steel mill profits narrow slightly [SMM Analysis]
[SMM Analysis] Steel Products and Raw Materials Pull Back in Tandem, Stainless Steel Mill Profits Narrow Slightly
This week, stainless steel product prices and smelting costs pulled back in tandem, with the cost side seeing a relatively small decline, leaving steel mill profit margins slightly narrower overall. Based on 304 cold-rolled calculations, the profit margin on current raw materials was 3.34%, while the profit margin on inventory raw materials was 2.92%.
The nickel pig iron segment showed an upward move followed by stabilization this week. Amid expectations that Indonesia’s nickel ore quotas may be further tightened, upstream bullish sentiment persisted, and high-grade NPI prices continued to climb early in the week. However, as stainless steel prices weakened during the week and steel mills gradually completed raw material stockpiling, market inquiries and transactions softened, halting the NPI uptrend, with prices flattening after the initial rise. As of Friday, the delivered tax-inclusive price of China’s 10-12% grade Indonesian high-grade NPI rose by 9 yuan per nickel unit.
Stainless steel scrap prices declined this week. SS futures stopped rising and pulled back, dragging spot steel products lower, while the high-grade NPI uptrend moderated. The decline in steel products transmitted along the industry chain to the raw material side, and scrap quotes followed suit and loosened. This round of declines was mainly driven by futures weakness and off-season demand expectations at year-end. Although steel mill production schedules rose in November, tight tax invoice circulation continued to weigh on scrap usage willingness, lowering the scrap utilization rate, and purchases did not expand in line with production schedules. The cost advantage of stainless steel scrap over high-grade NPI only provided a floor buffer, doing little to change the weak pattern, with prices likely to remain weak rather than strengthen in the short term. Going forward, close attention should be paid to steel product futures trends, steel mill production schedules and procurement pace, as well as changes in tax invoice circulation. As of Friday, the tax-exclusive price of mainstream 304 off-cuts in Shanghai fell by 100 yuan/mt…
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