[SMM Stainless Steel Daily Review] Macro news disturbances persist, SS consolidates. In the off-season, stainless steel spot prices remain firm, but transactions are sluggish.

According to SMM on July 3, SS futures overall held up well. US non-farm payrolls data missed expectations, inflation expectations fell, nonferrous metals strengthened overall, and SS rose in tandem. As of the midday close, the most-traded SS contract settled at 14,600 yuan/mt. In the spot market, the decline in SS futures eased temporarily. In addition, current stainless steel social inventory pressure was not outstanding, and with steel mills holding prices firm, spot offers remained solid.

SS Futures Most-Traded Contract. At 10:15 a.m., SS2608 was at 14,655 yuan/mt, up 75 yuan/mt from the previous trading day. Spot premiums for 304/2B in Wuxi were in the range of 315-865 yuan/mt. In the spot market, the average price of cold-rolled 201/2B coil in Wuxi was flat; for cold-rolled 304/2B coil with raw edges, the average price in Wuxi was flat, and the average price in Foshan was flat; cold-rolled 316L/2B coil prices in Wuxi remained flat; for hot-rolled 316L/NO.1 coil, Wuxi quotes were flat; cold-rolled 430/2B coil in both Wuxi and Foshan dropped 50 yuan/mt.

This week, macro and industry logic games dominated the futures trend. US inflation data pulled back, and market expectations for US Fed interest rate hikes further cooled. The US dollar index weakened, overall boosting valuations of commodities and nonferrous metals, providing macro support for metals. However, industry sentiment remained bearish, and the issue of supplementary quotas for Indonesian nickel ore remained unresolved. The market was strongly concerned about subsequent ample nickel supply. SHFE nickel traded in a low range, failing to rebound effectively. Dragged by nickel prices, SS futures remained in the doldrums, struggling to rise. However, support at the key 14,500 yuan/mt level below was strong, and the futures did not break down, moving sideways in a range overall. In terms of spot and inventory, mainstream steel mills remained resolute in holding prices firm, locking the downside room for spot prices from the factory gate. The market had fully entered the traditional consumption off-season, with inherent weak end-user rigid demand. Coupled with SS futures remaining in the doldrums, overall market trading confidence was insufficient, and traders had a strong willingness to destock and sell. Downstream end-users maintained a strong wait-and-see sentiment, mainly purchasing on demand, and on-market transactions remained sluggish. On the supply side, news of maintenance and production cuts continued to ferment. While the current round of social inventory stopped declining and slightly increased, the increase was limited, and overall inventory pressure remained relatively small. Multiple factors jointly supported spot prices staying firm. On the cost and profit side, finished product and raw material prices weakened in tandem this week, and the improvement in structural price spreads led to a WoW expansion in steel mill profits. During the week, the price center of nickel-based raw materials and stainless steel finished products shifted lower in sync, with the decline in raw material prices larger than that of finished products. Combined with spot prices staying firm thanks to steel mills holding prices firm, the profit margin for finished products recovered. This week, overall smelting profits at stainless steel mills widened, and the industry's profitability environment improved marginally. Overall, this week the stainless steel market exhibited a two-way pattern with macro support and industry pressure, showing a clear divergence between weak futures and firm spot prices. Sluggish end-use demand and thin trading during the off-season were the core bearish fundamentals, while steel mills holding prices firm, maintenance expectations, and low inventory continued to underpin spot prices. The decline in raw material prices allowed profit recovery at steel mills, easing profit pressure on the production side. In the short term, the market will continue to trade around US Fed policy expectations and games over Indonesia nickel ore policy, with futures moving sideways and the firm spot price pattern persisting. Going forward, focus should be on US dollar index trends, the progress on Indonesia nickel quota issuance, key support levels of SS futures, changes in downstream off-season rigid demand, and steel mill maintenance and commissioning progress.