[SMM Stainless Steel Daily Review] SS Futures Hold Steady, Stainless Steel Spot Cargo Watched Cautiously

SMM reported on February 27 that SS futures traded largely stable. The upward momentum in SS futures driven by news factors had largely been released, with prices trading broadly stable during the day, closing at 14,095 yuan/mt before the midday break. In the spot market, SS futures temporarily stabilized. Although market participants maintained a bullish sentiment, some downstream players remained on holiday, resulting in weak purchase willingness. Additionally, as prices continued to test higher after the holiday, cautious sentiment strengthened, leading to largely stable prices during the day.

SS futures' most-traded contract strengthened and tested higher. At 10:30 a.m., SS2604 was quoted at 14,150 yuan/mt, down 165 yuan/mt from the previous trading day. In Wuxi, spot premiums/discounts for 304/2B were in the range of 320-520 yuan/mt. In the spot market, cold-rolled 201/2B coils in Wuxi held steady; cold-rolled edged 304/2B coils held stable in both Wuxi and Foshan; cold-rolled 316L/2B coils in Wuxi rose 125 yuan/mt; hot-rolled 316L/NO.1 coils in Wuxi increased 200 yuan/mt; cold-rolled 430/2B coils in both Wuxi and Foshan held steady.

This week, the first week after the Chinese New Year holiday, the stainless steel market gradually recovered. SS futures strengthened and tested higher, driven by rising expectations for the traditional peak consumption season of "Golden March and Silver April" and continued fermentation of news related to Indonesian nickel ore, which bolstered bullish sentiment among market participants. However, the recovery in the spot market was slow, as some traders and downstream end-users had not yet resumed operations, and overall market activity had not fully recovered. Only a small number of rigid demand orders were concluded during the week, presenting a distinct pattern of "strong futures, weak spot." On the inventory side, social inventories of stainless steel showed significant seasonal buildup this week, mainly due to trading suspensions during the Chinese New Year holiday, continuous arrivals of goods, and some cargoes awaiting pickup. From an industry perspective, inventory buildup around the Chinese New Year is normal, and the extent of this buildup did not exceed market expectations. Market confidence remained largely unaffected, with no panic shipments from traders, and short-term inventory pressure stayed within a controllable range. On the supply side, domestic stainless steel mills concentrated on annual maintenance in February, leading to significant production cuts and a sharp decline in output, which alleviated short-term supply pressure. However, it is crucial to note that mills are expected to resume production on a large scale in March, which will test the demand absorption capacity during the "Golden March and Silver April" peak season. The supply-demand pattern may undergo phased adjustments. Cost-side support continued to strengthen, with ongoing developments in Indonesian nickel ore news pushing nickel ore prices steadily higher, thereby increasing production costs for nickel pig iron (NPI). High-grade NPI prices rose steadily. Although trading activity in the high-grade NPI market was limited this week, and major stainless steel mills did not accept the current high prices, resulting in low purchase willingness, bullish sentiment remained strong. Expectations of tight raw material supply kept prices firm, providing solid support for stainless steel production costs, and mills maintained reasonable profitability. Overall this week the stainless steel market exhibited a core characteristic of "strong expectations weak reality" with futures strengthening good peak season expectations and a relatively strong cost side jointly boosting market confidence; however weak spot transactions significant social inventory buildup and the supply pressure from concentrated resumption of production at steel mills in March also significantly constrained the market. The current core contention in the market centers on the pace of downstream demand recovery after the holiday the progress of inventory digestion and the actual resumption of production at steel mills in March. Subsequent focus should be on closely tracking these factors to determine the direction of the market trend.