[SMM Stainless Steel Daily Review] Stainless steel futures stop rising and pull back, spot trades weaken while prices stay stable.

According to an SMM report on June 17, SS futures showed signs of stopping their rise and pulling back. Although nonferrous metals futures generally strengthened today, SHFE nickel remained in the doldrums with weak fluctuations, and coupled with insufficient upward momentum after stainless steel's rapid consecutive gains earlier, the futures pulled back slightly today. As of the midday close, the most-traded SS contract settled at 15,190 yuan/mt. In the spot market, SS futures continued to climb during the week, lifting spot offer prices higher, and purchase demand was largely released at the beginning of the week. After SS futures fell today, market inquiries and transactions weakened somewhat, but spot offer prices remained firm.

SS most-traded futures contract. At 10:15 a.m., SS2607 was at 15,210 yuan/mt, up 115 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the 10-410 yuan/mt range. In the spot market, the average price of cold-rolled 201/2B coils in Wuxi was flat. For cold-rolled trimmed edge 304/2B coils, the average price in Wuxi was flat, and in Foshan was also flat. The price of cold-rolled 316L/2B coils in Wuxi rose by 150 yuan/mt. For hot-rolled 316L/NO.1 coils, the offer price in Wuxi increased by 50 yuan/mt. Cold-rolled 430/2B coils in both Wuxi and Foshan remained stable.

This week, stainless steel futures and spot prices both came under pressure and declined, with overseas macro headwinds dominating the market and pessimistic off-season sentiment spreading rapidly. Industry expectations for the future weakened, end-users turned highly cautious, rigid demand remained sluggish, and traders concentrated on offering discounts to sell and destock. In the futures market, overseas macro factors were the core driver this week. US non-farm payrolls data significantly exceeded expectations, the unemployment rate remained low, and the market pushed back or even canceled expectations for US Fed interest rate cuts this year, sending the US dollar index to a nearly two-month high and broadly weighing on the valuation of the nonferrous metals sector. Dragged down by this, SS futures continued a unilateral decline, quickly breaking below the previous support level of 14,500 yuan/mt, with bearish sentiment released in a concentrated manner, further weakening sentiment across the entire industry chain. In terms of spot and inventory, spot offer price declines lagged significantly behind futures this week, highlighting the divergence between futures and spot. The sharp fall in futures dragged on market sentiment, significantly strengthening traders' willingness to sell and destock, and low-priced cargoes continued to emerge in the market. Currently in the traditional consumption off-season, downstream rigid demand is weak, buying interest is insufficient, and transactions are only slightly supported by low-priced cargoes, with overall performance sluggish. Supply side, some steel mills successively implemented production cuts and maintenance this week, marginally tightening industry supply. Coupled with traders' proactive clearing of inventory, social inventory continued its destocking trend and pulled back slightly despite weak off-season demand. Cost and profit side, raw material prices for stainless steel generally resisted declines this week, diverging from the trend in finished steel prices. High-grade NPI saw limited declines, while stainless steel scrap and high-carbon ferrochrome prices remained firm, providing relatively strong support from the raw material side. But spot prices continued to pull back, finished steel weakened while costs remained rigid, directly squeezing steel mills' profit margins. Profit calculations show that the profit margin based on spot raw material prices has pulled back to around 1.9%, and dragged down by previously high-priced inventory, the profit margin based on raw material inventory costs further dropped to 0.84%. Overall profitability narrowed significantly, which may increase steel mills' willingness to implement voluntary production cuts. Overall, this week futures pulled back, driving sentiment to turn bearish, and off-season rigid demand remained weak. Although steel mill maintenance and traders' active destocking led to a slight pullback in inventory, providing some support to spot prices, it was difficult to reverse the overall weak trend. Raw material prices remained firm, holding the bottom for spot prices and limiting the room for deep declines. In the short term, the market will maintain a pattern of weak futures, resilient spot prices, and sluggish transactions. Going forward, the focus is on US Fed policy expectations, US dollar index trends, the support strength of SS futures, the sustainability of downstream rigid demand, and the progress of steel mill maintenance implementation.