[SMM Analysis] Strong Costs Reshape Valuations, Policy Implementation Concludes with a Rise [SMM Stainless Steel Futures Weekly Review]

SMM data shows that during the last three trading days of 2025 (December 29-31, 2025), the most-traded stainless steel contract (SS2602) closed the year on a strong note. As of 10:30 am on December 31, the contract price stood at 13,105 yuan/mt, up 170 yuan/mt (+1.31%) WoW from the closing price of 12,935 yuan/mt on the previous Friday. The main theme of this week's market quickly shifted from the "weak reality" of the year-end off-season to "expectation trading" driven by news about Indonesian nickel ore. Under the dual impetus of significantly increased raw material costs and the implementation of macro policies, bullish funds actively pushed prices higher, driving the futures center above the 13,100 threshold, ending the year with a positive note.

From a macro perspective, the 2026 "national subsidy" policy has been finalized, with mixed impacts. The National Development and Reform Commission (NDRC) and the Ministry of Finance officially issued the "Notice on Implementing Large-Scale Equipment Renewal and Consumer Trade-in Policies in 2026," allocating the first batch of 62.5 billion yuan. Notably, the policy details show a "protect and pressure" characteristic: new subsidies for products like smart glasses were added, but the scope of home appliance subsidies was reduced, and the subsidy ratio was lowered from 20% to 15%, with the single-item cap also decreased. Overseas, signals of a US economic recession and policy disputes have intensified. In December, the US consumer composite index fell to a low of 89.1, matching the longest consecutive decline since the 2008 financial crisis. Weak job growth and rising unemployment are eroding market confidence, and it is generally expected that Q4 GDP will slow down significantly due to layoffs and the earlier government shutdown. Meanwhile, the White House signaled a "widening of the inflation target range (to 1%-3%)" which, while increasing the flexibility for interest rate cuts and bringing short-term optimism, has also raised concerns about long-term high inflation and a "bear steepener" in the US Treasury yield curve. If long-term interest rates rebound, it could compress commodity valuations, requiring close attention to potential shocks to the financial attributes of commodities from bond market anomalies.

Fundamentally, the spot market saw a long-awaited "upturn" in the final moments before the holiday. At the beginning of the week, transactions were sluggish due to the off-season, but as futures prices rose, the market quickly switched to a "rush to buy amid continuous price rise and hold back amid price downturn" mode. Upstream steel mills and agents showed a strong intention to hold prices firm, with some agents even stopping quotes to withhold sales. Taiwanese steel mills took the lead in significantly raising their January 2026 prices, further fueling the bullish sentiment. Traders took the opportunity to lock in profits by offering small discounts to boost sales. Although downstream end-users remained cautious, some were forced into the market by panic-driven buying, leading to a recovery in 304-series transactions.

The "surge" in the cost side was the most critical driver of this week's market performance. According to SMM data, as of December 31, the offer price for high-grade NPI broke through the 920 barrier strongly, soaring to 922.5 yuan/mtu, a significant jump WoW; high-carbon ferrochrome held steady at 8,100 yuan/mt (50% metal content). The sharp rise on the cost side directly reshaped the cost support line for stainless steel, making the rise in futures prices more perceived as a cost-driven valuation correction.

Overall assessment indicates the market exhibited year-end characteristics of "strong cost-side driving force, passive follow-up increases in the spot side." Supply disruptions in Indonesian ore combined with a significant rise in NPI prices effectively built a bottom defense line for futures, with the upward shift in the cost center dominating the year-end valuation correction trend. Looking ahead to the post-holiday market, with cost support above 13,000 yuan/mt effectively established, the market's focus will gradually shift from "cost push" to "demand verification." It is recommended to closely monitor the willingness of downstream end-users to accept high-priced resources and the accumulation rate of social inventory after the holiday. The futures market is expected to hold up well initially after the holiday, primarily digesting the increase in raw material costs.