[SMM Stainless Steel Daily Review] Nonferrous metals collectively declined, dragging SS into a volatile pullback; downstream stayed on the sidelines and stainless steel spot prices held firm, limiting the decline.

On June 23, SMM reported that SS futures fluctuated lower and gradually pulled back. On the day, nonferrous metals futures declined broadly, dragging SS futures down in tandem. As of market close, the most-traded SS contract settled at 14,885 yuan/mt. In the spot market, although SS futures pulled back sharply, downstream enterprises grew more cautious and adopted a wait-and-see approach, with sluggish spot trading showing no significant improvement. However, spot traders continued to hold prices firm, and overall declines were relatively limited.

SS futures most-traded contract: At 10:15 a.m., SS2608 was quoted at 14,930 yuan/mt, down 155 yuan/mt from the previous trading day. In the Wuxi area, spot premiums for 304/2B were in the range of 240-640 yuan/mt. In the spot market, the average price of Wuxi cold-rolled 201/2B coil was flat; for cold-rolled 304/2B coil with mill edge, the average price in Wuxi fell by 50 yuan/mt, while in Foshan it was unchanged; the price of cold-rolled 316L/2B coil in Wuxi was flat; the quote for hot-rolled 316L/NO.1 coil in Wuxi fell by 25 yuan/mt; and cold-rolled 430/2B coil prices were steady in both Wuxi and Foshan.

During the week, stainless steel futures and spot prices swung wildly. Overseas macro expectations repeatedly disrupted the futures market, intensifying the tug-of-war between longs and shorts. Overall, the market was characterized by macro forces driving futures movements, trading volumes fluctuating with sentiment, tight supply supporting spot prices, stable inventories, and a modest recovery in profits. At the start of the week, macro tailwinds boosted market sentiment, triggering a rebound in futures that in turn revived spot trading. Mid-week, hawkish expectations from the US Fed intensified, sending futures lower again and prompting end-users to turn more cautious in procurement. Backed by mills holding prices firm and marginally tighter supply, spot prices edged up with limited volatility, resulting in a notable divergence between futures and physical markets. In the futures market, price movements this week were entirely dictated by overseas macro developments, with the overall pattern rising first then falling. At the start of the week, the easing of US-Iran geopolitical tensions, coupled with weaker US core CPI data, fueled expectations of cooling inflation, lifting the entire nonferrous metals complex. SS futures rebounded accordingly, recovering from earlier weakness. However, mid-week, the Fed's meeting signaled a hawkish stance, reigniting rate hike expectations. Macro tailwinds quickly faded, risk-off sentiment rose, and this dragged SS futures lower, leaving them in the doldrums overall. Spot market and inventories: Spot trading this week was highly correlated with futures, though with clear phases of divergence. At the start of the week, futures strength prompted concentrated end-user restocking, with trading volumes surging notably. Mid-week, as futures weakened, wait-and-see sentiment intensified and trading quickly turned sluggish. During the week, social inventories of stainless steel remained stable overall. On the supply side, strong support for spot prices was provided, as mills remained determined to hold prices firm. This, along with maintenance-related production cuts taking effect during the month and some mills postponing production resumptions, led to marginal tightening of industry supply. This underpinned a modest uptick in spot prices with manageable fluctuations. On the cost and profit front, raw material prices showed structural divergence this week, while the recovery in finished product prices drove a slight improvement in steel mill profits. Raw material side, high-grade NPI trading activity increased and prices rose, high-carbon ferrochrome prices weakened, and stainless steel scrap prices remained stable, with overall raw material cost fluctuations staying mild. This, coupled with a modest uptick in spot steel prices, effectively offset some of the pressure from raw material fluctuations, driving a slight expansion in stainless steel mill profit margins. Overall, this week, fluctuating macro sentiment triggered wild swings in futures, while expectations of supply contraction supported the resilience of the spot market, highlighting a divergence between futures and spot markets. End-user transactions relied entirely on futures market sentiment, with off-season demand lacking resilience and gradually weakening. The structural divergence in raw materials helped steel mill profits recover slightly, providing some support to industry production. In the short term, the market remains dominated by macro expectations, with futures fluctuating frequently and spot prices maintaining a relatively stable trend on the back of supply support. Going forward, key focus should be on US Fed policy expectations, the pace of SS futures fluctuations, the sustainability of downstream transactions, and the progress of steel mill maintenance and production resumptions.