[SMM Stainless Steel Daily Comment] Funding Side and SHFE Nickel Resonance Boost SS Futures, Spot Stainless Steel Demand Remains Weak

According to SMM on July 14, SS futures showed a strengthening and upward probing trend. Driven by the strengthening of SHFE nickel in the night session, combined with fluctuations in SS's own funding side, SS futures quickly probed upward after the night session opened, and then maintained a pattern of consolidating on a strong note overall. As of the midday close, the most-traded SS contract closed at 14,565 yuan/mt. Spot market, boosted by SS stopping falling and strengthening, spot quotes recovered the declines from yesterday afternoon, the availability of low-priced goods in the market decreased, some traders raised their offers slightly, downstream end-user clients still held a wait-and-see sentiment, and overall transactions remained mediocre.

The most-traded SS futures contract. At 10:15 a.m., SS2608 was reported at 14,540 yuan/mt, up 210 yuan/mt from the previous trading day. 304/2B spot premiums in the Wuxi area were in a range of 330-730 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi remained flat; for cold-rolled raw edge 304/2B coils, the average price in Wuxi was flat, and the average price in Foshan was flat; the price of cold-rolled 316L/2B coils in the Wuxi area was flat; for hot-rolled 316L/NO.1 coils, offers in Wuxi were flat; cold-rolled 430/2B coils in both Wuxi and Foshan were flat.

This week, macro funding-side disturbances intensified, stainless steel futures trended independently and weakly, and futures movements significantly decoupled from the pace of SHFE nickel and other non-ferrous metals. Throughout the week, funding sentiment switched repeatedly, leading to wild swings in SS futures; the previous key support level of 14,500 yuan/mt was broken, the overall trend center continued to shift downward, and overall market trading sentiment turned pessimistic. Spot and inventory side, futures breaking down and weakening continued to drag on the spot market's performance, with bearish fundamentals in the off-season being released in a concentrated manner. The market entered the traditional consumption off-season, terminal rigid demand is naturally weak, coupled with the continuous decline in futures further hitting market confidence, downstream end-user wait-and-see sentiment dominated, and purchase willingness remained sluggish. This week, mainstream steel mills ended their earlier strategy of holding prices firm and proactively lowered spot guidance prices, leading to concurrent pullbacks in market spot quotes. Transactions in the field showed a pattern of phased, pulse-like releases followed by rapid cooling, sustained rigid demand was severely insufficient, and overall trading returned to a sluggish state. Against the backdrop of weak end-user purchases and obstructed inventory digestion, the market's inventory buildup pace significantly accelerated, social inventory continued to accumulate, and spot fundamentals' pressure further intensified. Cost and profit side, this week prices of finished products and raw materials declined in tandem, steel mill smelting profits narrowed slightly but remained positive. Affected by falling spot prices and pressured profits in finished steel, mainstream steel mills lowered their raw material purchase expectations, announcing NPI procurement and tender prices at low levels, which drove the high-grade NPI market price down, while stainless steel scrap purchase prices also pulled back. Overall, the raw material cost center shifted lower. Steel mill profits were slightly compressed WoW, but the industry as a whole did not incur losses, and production profit resilience persisted. Overall, the stainless steel market this week presented a subdued pattern with futures breaking below key levels and moving lower, spot prices following suit and softening, inventory buildup accelerating, and profits narrowing slightly. Macro fund disturbances drove futures to weaken independently, while off-season weak rigid demand, the retreat of steel mills’ price support, and inventory accumulation were the core bearish factors for spot. In the short term, the weak market structure is hard to reverse, with futures continuing to consolidate on a subdued note and spot prices remaining under pressure.