[SMM Stainless Steel Daily Review] Easing Geopolitical Sentiment Supports Base Metals; SS Futures Held Up Well and Fluctuated Upward

The most-traded SS futures contract fluctuated downward. At 10:15 a.m., SS2604 was quoted at 14,310 yuan/mt, up 100 yuan/mt from the previous trading day. In Wuxi, spot premiums for 304/2B were in the 210-410 yuan/mt range. In the spot market, Wuxi cold-rolled 201/2B coils were stable; for cold-rolled trimmed-edge 304/2B coils, the average price in Wuxi was stable and the average price in Foshan was stable; cold-rolled 316L/2B coils in Wuxi were stable; hot-rolled 316L/NO.1 coils in Wuxi were quoted stable; and cold-rolled 430/2B coils in both Wuxi and Foshan were stable.

As the market entered the traditional peak consumption season of “Golden March and Silver April,” the stainless steel market saw a window for demand recovery. Downstream demand gradually resumed work and production after the Chinese New Year holiday, and demand showed a gradual recovery trend. However, although transactions improved compared with the earlier period, the bustling peak-season momentum had yet to emerge; terminal procurement remained mainly just-in-time, and stockpiling willingness was relatively low. On the futures side, driven by safe-haven demand triggered by geopolitical conflicts, the US dollar strengthened, and the upward momentum of SS futures was capped. Overall, this week was dominated by choppy trading, failing to form a sustained uptrend. On the inventory side, stainless steel social inventory did not build further this week, but remained at elevated levels overall, with high inventory pressure constraining the market. Although inventory did not continue to increase, elevated inventory combined with demand recovery falling short of expectations meant destocking pressure persisted, and traders remained cautious on the pace of shipments. Supply side, steel mill maintenance and production cuts in February had fully ended, and steel mills’ production schedule in March rose sharply, significantly releasing the pressure from incremental supply. Facing supply pressure, steel mills mainly focused on stabilizing prices while actively making shipments, proactively controlling price fluctuations and accelerating inventory turnover to ease supply-side pressure, but expectations of oversupply still weighed on the market. Cost support remained strong, with the impact of news on Indonesian nickel ore still in place; ore prices held up well, pushing up NPI production costs, and high-grade NPI prices rose steadily. With stainless steel mill profits currently relatively thin, acceptance of high-priced NPI was limited. This week, high-grade NPI transactions were relatively sluggish, but bullish sentiment in the NPI market was strong and low-priced cargoes were hard to find, with the cost side effectively curbing downside room for stainless steel prices. Overall, the stainless steel market this week showed the core characteristics of “incremental supply, weak demand recovery, strong cost support, and high inventory,” and the key contradiction was the mismatch between incremental supply and the pace of demand recovery. Although expectations for the peak season remain and cost support is strong, increased supply, inventory at high levels, and a demand recovery falling short of expectations have led to a decline in market confidence. The current core tug-of-war centers on the pace of demand recovery, the ability to draw down inventory, and steel mill shipments. Going forward, it is necessary to closely track demand release, inventory destocking, and changes in nickel ore prices to assess market trends.