Price Trends
Recently, the price of scrap stainless steel has remained stable. As of June 28, the price for 304 industrial-grade scrap in Wenzhou stood at 9600 yuan/ton. The price of steelwater has remained unchanged for nearly half a month. During the rainy season in the Jiangsu and Zhejiang regions, the market circulation of resources has been tight, and the atmosphere of price support has increased. At the end of the month, the procurement prices of some steel mills have slightly increased, although actual transaction volumes have been limited.
Inventory Levels
The destocking speed of finished products has accelerated. This week, the total social inventory of stainless steel across the 89 mainstream markets in China was 1.087 million tons, a week-on-week decrease of 4.13%. Social inventory has declined, with different levels of digestion across various categories. Stainless steel futures have fluctuated around 14,000, and with end-of-month agent volume impacts, there has been some price support for finished products. The rainy season in Jiangsu and Zhejiang markets and the end-of-month invoice demands from merchants indicate that weak demand is still a fact. The accelerated destocking is mainly due to reduced arrivals at steel mills and continued just-in-time procurement in the market, with low-priced resources being partially digested. The slightly increased transaction volume in the past two weeks also brought delayed destocking data.
Economic Considerations
Since June, the overall impact of macroeconomic factors on the nickel-iron market has diminished. Coupled with the pressure from terminal demand, prices have been under downward pressure. Scrap prices have fallen in tandem with finished products. Based on the mainstream procurement price for 304 industrial scrap in South China at 9600 yuan/ton as of June 28, this price translates to approximately 968 yuan per nickel unit, 13 yuan per nickel unit lower than the price of high-nickel iron during the same period. The economic advantage of scrap stainless steel is evident, although short-term pressure on scrap prices is expected due to a slight recovery in the return of nickel-iron.
Cost and Profit Margins
As of June 27, the profit margin for producing 304 cold-rolled stainless steel via short-process methods was 3.09%, a week-on-week increase of 0.31 percentage points. For production using externally purchased high-nickel iron, the profit margin was 0.72%, a week-on-week increase of 0.55 percentage points. For production using self-produced high-nickel iron, the profit margin was 0.75%, a week-on-week increase of 0.31 percentage points.
Price Trends of Other Raw Materials for Stainless Steel
Nickel-Iron: Recently, the volume of returning Indonesian nickel-iron has slightly recovered. However, compared to historical peaks, the return volume is still at a significant distance. Additionally, high nickel ore prices in Indonesia have resulted in some Indonesian iron production costs being inverted, providing strong support for bottom prices. Future trends will need to focus on the latest market transactions and the situation regarding Indonesian nickel-iron returns.
Ferrochrome: After large-scale steel tenders, factory quotations have become more conservative, yet cost support has kept prices around 9000 yuan/50 base tons ex-factory. Factories continue to maintain normal shipments, with tight supplies of low-priced ferrochrome under high mining costs. Incremental trends are beginning to appear in small-scale steel tenders.
Ferromolybdenum: With reduced molybdenum steel production by major steel mills in July, market demand has shrunk, and ferromolybdenum tender prices have accelerated their decline. The ferromolybdenum market is under downward pressure, with merchant quotes lowering and bulk transactions being sluggish. The market sentiment for ferromolybdenum is cautiously bearish in the short term, with a predominant cautious outlook.
Conclusion
The destocking of stainless steel has provided some support for market confidence, with short-term attention needed on steel production cuts. The strong support for the bottom price of nickel-iron limits further downward movement. The scrap market faces tight supply with some price support atmosphere, but considering the current traditional consumption off-season and steel production cuts, the demand for scrap will decrease, maintaining short-term pressure on scrap prices.