[SMM Stainless Steel Daily Review] Macro Disturbances Compounded by Off-Season Drag, Stainless Steel Futures and Spot Weaken in Tandem with Inventory Buildup

SMM reported on June 5 that SS futures fluctuated downward and pulled back gradually. Nonferrous metals futures continued the weak pattern from the previous day, with the downward trend intact, weakening further and pulling back; SS futures were dragged down and declined in tandem. As of the morning close, the most-traded SS contract was at 14,635 yuan/mt. In the spot market, affected by the persistent in-the-doldrums SS futures, combined with the onset of the traditional consumption off-season and weak end-use consumption, downstream enterprises were generally cautious in inquiries and purchases, and market transactions turned dull again; additionally, social inventory shifted from decline to rise, showing an accumulation trend, and traders lowered their quotes to varying degrees due to transaction pressure.

The most-traded SS futures contract fell and pulled back. At 10:15 a.m., SS2607 was at 14,635 yuan/mt, down 135 yuan/mt from the previous trading day. Spot premiums for 304/2B in the Wuxi area were in the range of 435-1,035 yuan/mt. In the spot market, the average price for cold-rolled 201/2B coils in Wuxi was flat; for cold-rolled raw-edges 304/2B coils, average prices fell by 50 yuan/mt in Wuxi and 50 yuan/mt in Foshan; cold-rolled 316L/2B coil prices in Wuxi were unchanged; hot-rolled 316L/NO.1 coil quotations in Wuxi were stable; and cold-rolled 430/2B coil prices were stable in both Wuxi and Foshan.

Stainless steel futures and spot markets experienced heightened volatility. Futures, disrupted by overseas macro news, rose first then fell, and the off-season characteristics of the market became fully evident. The industry harbored vague expectations for the future market, with a strong wait-and-see sentiment. Transactions recovered in pulses but lacked sustainability, and traders faced rising selling pressure, mostly stimulating sales by offering concessions. Overall, the market presented a game of macro news disrupting futures, weakening off-season demand, marginal supply adjustments, and inventory stopping its decline and building up. On the futures side, SS futures were highly volatile, retreating after rapid rise. During the week, the US adjusted import tariffs on some steel, aluminum, and copper, boosting market sentiment and driving the nonferrous metals sector collectively stronger; SS futures surged to 15,175 yuan/mt in tandem. However, subsequent US economic data showed persistent inflation pressure, raising expectations for US Fed interest rate hikes, which suppressed commodity prices; metals futures weakened collectively, and SS futures pulled back accordingly. Recent market movements were dominated by macro news, with weak support from industry chain fundamentals. In terms of spot and inventory, mid-week futures surges drove spot prices to strengthen periodically, releasing market sentiment of rushing to buy amid continuous price rises, and short-term transactions recovered. But as the market had entered the traditional consumption off-season, with overall weak end-user rigid demand, transactions turned dull again after futures pulled back. Affected by sluggish transactions, traders generally offered concessions to sell. Supply side, some steel mills planned to carry out maintenance and cut production in June, leading to a slight decline in industry output, which moderately eased product pressure; however, the scale of production cuts was limited, and supply pressure was not materially relieved. Dragged by the weak supply-demand pattern, stainless steel social inventory built up slightly this week to 940,400 mt, ending the prior trend of continuous destocking. Cost and supply side, the overall raw material market is mediocre, with high-grade NPI’s upward momentum slowing and prices of stainless steel scrap and high-carbon ferrochrome basically stable. The raw material side lacks upward momentum, providing limited boost to finished product prices. Currently, steel mills’ profitability is favorable, with profit margins based on spot raw materials holding at 2%–3% and those based on inventory raw materials reaching 3.5%–5%. Ample profits support mills’ production enthusiasm, and the industry’s overall production schedule remains high. Supported by stable costs and moderate profits, mills show weak willingness to voluntarily cut production, leaving only marginal adjustments on the supply side. Overall, the stainless steel market is significantly affected by macro disturbances, with futures dominating spot price trends and overall market sentiment cautious. On the fundamentals, the weakening demand trend in the off-season is clear, with sluggish end-user transactions acting as the core bearish factor. Although mill maintenance brings slight supply contraction, high profits sustain high production schedules, breaking the weak supply-demand balance and causing a slight inventory rebound. Support from the raw material side is weak and cannot offset demand-side pressure; the risk of supply-demand mismatch persists, and overall prices remain under pressure. Going forward, key focuses include US Fed policy expectations, SS futures fluctuations, changes in downstream off-season rigid demand, and the progress of mill maintenance implementation.