[SMM Stainless Steel Daily Review] SS Futures Traded in a Choppy Range; Bullish Sentiment in the Stainless Steel Spot Market Weakened

SMM reported on March 6 that SS futures held up well in choppy trading. SS moved in the doldrums in the night session, but gradually strengthened and pushed higher after the daytime session opened, eventually closing at 14,115 yuan/mt. In the spot market, spot quotes pulled back in the morning under the influence of weaker SS performance in the night session; however, as futures fluctuated upward, spot quotes also followed higher, with limited overall adjustment. Recently, amid factors including expectations for high stainless steel production schedules in March, a slowdown in the rise of high-grade NPI prices, and a sluggish recovery in downstream demand, traders’ earlier bullish sentiment has weakened somewhat, and their willingness to make shipments has increased.

The most-traded SS futures contract strengthened in choppy trading. At 10:15 a.m., SS2604 was quoted at 14,240 yuan/mt, down 35 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the 280-480 yuan/mt range. In the spot market, Wuxi cold-rolled 201/2B coils were generally stable; for cold-rolled trimmed-edge 304/2B coils, the average price in Wuxi fell by 25 yuan/mt while 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 as end-users returned to 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. End-user procurement was mainly driven by rigid demand, with low willingness for stockpiling. 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 constrained. Overall, this week was dominated by choppy trading, failing to form a sustained rise. On the inventory side, stainless steel social inventory did not accumulate 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 a demand recovery that fell short of expectations meant destocking pressure remained, and traders maintained a cautious pace of shipments. Supply side, maintenance-related production cuts at steel mills in February have fully ended, and steel mills’ production schedules for March rose sharply, significantly releasing pressure from incremental supply. Facing supply pressure, steel mills mainly focused on actively making shipments while keeping prices stable, proactively controlling price fluctuations and accelerating inventory turnover to ease supply-side pressure, but expectations of oversupply continued to weigh on the market. Cost support remained relatively strong. The impact of news on Indonesian nickel ore persisted, with ore prices holding up well, pushing up NPI production costs, and high-grade NPI prices rising steadily. Currently, stainless steel mills’ profit margins are relatively narrow, limiting their acceptance of high-priced NPI. This week, transactions for high-grade NPI were relatively sluggish, but bullish sentiment in the NPI market remained strong, with low-priced supply hard to find, and the cost side effectively curbed downside room for stainless steel prices. Overall, the stainless steel market this week showed the core characteristics of “increasing supply, a weak demand recovery, strong cost support, and elevated inventory,” with the key contradiction being a mismatch between the supply increase and the pace of demand recovery. Although expectations for the peak season remained and cost support was strong, the supply increase, inventory at high levels, and a demand recovery falling short of expectations weakened market confidence. The current core tug-of-war centered on the progress of demand recovery, the ability to draw down inventory, and steel mill shipments. Going forward, it is necessary to closely track demand release, inventory reduction, and changes in nickel ore prices to assess market direction.