Cost-supporting stainless steel prices may continue to remain high
Created date: 2021-07-29

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Profits from stainless steel production have been shrinking recently after rapid expansion. As of August 18, the profit of stainless steel 304 cold coil was 1,732.07 yuan/ton, a decrease of 1,432.86 yuan/ton from the beginning of the month; the profit rate was 9.05%, a decrease of 7.15 percentage points from the beginning of the month. From the perspective of the overall profit trend during the year, early August was a stage high. Compared with the beginning of the year, the profit increased by 1,772.69 yuan/ton, and the profit margin increased by 9.31 percentage points.


Corresponding to the change in profit is the change in production costs. As of August 18, the comprehensive cost of stainless steel 304 cold coil was 19129.58 yuan/ton, a decrease of 401.63 yuan/ton from the beginning of the month and an increase of 1848.37 yuan/ton from the beginning of the year. From the above figure, it can be seen that as early as the end of July, the cost has taken the lead to decline from the high level, and the adjustment node is slightly earlier than the market price and profit. Therefore, it can be seen to a certain extent that cost changes have a certain guiding effect on market trends.


The most direct impact of the obvious changes in profits and costs is the changes in the prices of finished materials and raw materials.


The trend of stainless steel finished products saw a more obvious and rapid rise in July, and fell from a high level in August. From the perspective of the trend of raw materials, ferronickel and electrolytic nickel began to rise in this round in April, and ferrochrome also began to rise in this round in May. Although stainless steel rose in May and June, the relative range was limited. , There was a more obvious outbreak in July. Therefore, changes in raw materials are an important driving force for changes in the market of finished materials, and changes in finished materials are an important determinant of profit amplification.


From the perspective of the expected changes on the raw material side, in terms of ferronickel, due to the repeated epidemics in major nickel supply areas such as Indonesia and the Philippines, while the output of domestic ferronickel companies has declined, the overall ferronickel supply remains tight. Regarding ferrochrome, under the energy consumption control policy, the output of main ferrochrome producing areas such as Inner Mongolia continues to be limited. Although some production capacity resumes, it may be difficult to achieve stable production, and the actual increase in output may be relatively weak. In terms of scrap stainless steel, the summer is coming to an end, and the supply of scrap is expected to gradually recover. However, compared with the tension of ferronickel and ferrochrome, it may be difficult to effectively fill the gap. In addition, ferromolybdenum is supported by the rapid rise in the international market, and it remains easy to rise but difficult to fall in the short term; electrolytic manganese is also affected by the energy consumption control policy, and the supply continues to be tight. Therefore, the overall cost-side support effect on the stainless steel market has further enhanced expectations.


From a fundamental perspective of the supply and demand of stainless steel, there has been a certain increase in recent market arrivals, but no significant inventory accumulation has been formed, and the overall supply of steel mills is still showing a certain tightness, and the supply side still supports stainless steel. With the "golden nine silver ten" traditional sales season approaching, end customers' willingness to purchase may increase, and the demand side will also support the stainless steel market. So overall, the fundamentals of supply and demand continue to be strong. In addition, the expectation of the traditional peak sales season will also give the industry confidence in the market outlook. However, taking into account the weak digestion of market sources this month, sales pressure in the second half of the month may keep the market under pressure in the short term.


On the whole, under the strong support of the cost side, the stainless steel market is expected to have room for further increase. However, considering that the previous price level continues to rise and advance the market adjustment space, it may limit the room and pace of further price increase to a certain extent. However, there is a high probability that the center of gravity of stainless steel prices will remain high in this peak season.


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